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#5 on the Franchise 500: The UPS Store Meets Customers Where They Are The #5 company on our Franchise 500 list has found new growth by opening smaller locations inside pharmacies, hotels, and military bases.

By Gordy Megroz

entrepreneur daily

This story appears in the January 2020 issue of Entrepreneur. Subscribe »

Courtesy of UPS

The UPS Store can thank dissatisfied customers for its recent success -- though, of course, we're not talking about its own customers. "About a third of online purchases are returned," says Tim Davis, president of The UPS Store. "And that's become a very attractive business segment for us."

To cash in on the returns of dissatisfied e-commerce companies, UPS has signed deals to be the official return courier for several major retailers. (Davis won't say exactly which ones.) The UPS Store is also under contract to ship hardware, such as cable boxes, back to utility companies when customers are done using them. "We're reducing the touch points in the return process," says Davis.

Related: Company Vet David Abney Is New UPS CEO

Tapping into predictable shipping helped drive a net gain of 104 UPS Stores in 2018. But that doesn't fully explain the company's recent success. The other key lies in its efforts to meet customers where they already are. Over the past two years, new UPS Stores have increasingly opened in nontraditional locations such as pharmacies, supermarkets, hardware stores, hotels, and military bases. You'll now find small-footprint UPS Stores inside major chains like Meijer (a Midwestern supermarket) and Omni Hotels & Resorts, and all together, these new locations account for some 26 percent of the company's sales.

According to Davis, increasing the company's footprint is just one part of a bigger plan to serve more customers. Soon, he says, UPS will begin experimenting with drone deliveries, and already, it's begun putting pressure on franchisees to stay open seven days a week.

But the company's biggest change might be symbolic. This year, in a stark revolt against UPS's traditionally brown branding, many stores received splashes of blue, white, and yellow as part of a new store concept test.

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