Carol Tome: So, as we look at the small package volume in the United States, what we’re seeing is basically a reversion to mean. So, we’re at pre-pandemic levels. And I think our learning — all of our learnings is that, if the pipeline spikes because of an event, things are going to revert back to the main. If you look at the growth rates projected for the small package market in the United States, it’s low single-digits for the next couple of years. So we plan to grow not just at the market, but ahead of the market because of the investments that we’re making with new products, new capabilities and actually new acquisitions, which we’re very excited about. And maybe I’ll just take a minute to talk about Happy Returns, which we just announced last night.
Our returns business has been pretty growthy because of the explosion of e-commerce. It’s grown 25% since 2020. And we like this business a lot. But we know we can offer a better experience for our retailers because it’s expensive. Retailers estimate that between 20% and 30% of all online orders are returned, and it cost them on average, about $33 to process that return. So it’s Happy Returns. We’re going to offer consolidated returns for our customers, which will reduce their handling costs. Actually improve our delivery density. So it’s a win-win-win. And so we’re going to put the pedal to the metal in terms of growing the returns business because it’s a very good business for us and one that our customers need a sale force. So I’m excited about that.
The other acquisition that I’m excited about is in health care. Our health care business will be $10 billion this year against an addressable market that’s over $100 billion. We’re going to grow that market. It’s got double-digit margins. We’re going to grow it because we need to grow it. It’s important for the world. It’s important for humanity. And we are the best in the world access. So that doesn’t require any consumer spending. That’s just leading into a market share capture with the capabilities that we are investing in, be it cold chain capabilities and more.
Christyne McGarvey: Really helpful. Thank you.
Carol Tome: Yeah.
Operator: Our next question will come from the line of Jeff Kauffman of Vertical Research Partners. Please go ahead.
Jeff Kauffman: Thank you very much. I’d like to drill down a little bit on the macro comments as they relate to domestic. I think it’s pretty straightforward. What you’re saying about Europe and Asia. But can you help put some understanding around your concern for the weaker consumer with student loans and what have you. It does sound like we’re going to be in for a reasonable holiday season. Where are you seeing the weakness, whether it’s a — an industry segment or a consumer segment. What concerns you on e-commerce and the domestic consumer?
Carol Tome: Well we’ve seen clearly a shift from goods to services and people through the pandemic started going back to work, taking vacations, eating out at restaurants, going to amusement park. They’re spending their dollars differently. It’s like source. It’s not that the consumer is not healthy, they’re spending their dollars different way. And what we’re seeing with many of our retail customers. It’s a real desire to bring people back into the stores and they should bring people back into the stores, because it’s their largest investment. So you see retailers offering buy online pickup in-store, where they hadn’t offered that before. So I can give you example after example of customers, not by name, obviously, but customers that are in our top 20 where they’re seeing their same-store sales down year-on year, because their anniversary in that COVID peak, if you will, and they’re seeing their online sales down even more.
And part of that is because people are going back into stores — part of that and shifting. So that’s that comment that Brian made in his remarks about just some demand softening Is that, we do see that with some of our larger customers who didn’t divert but their overall business and you can look at their guy, so I’m not talking about anything that’s not public. You can look at our guidance, were they not only have reported declining sales, but they are guiding softer.
Jeff Kauffman: Thank you for the clarification.
Carol Tome: Yeah.
Operator: Our next question will come from the line of Brandon Oglenski of Barclays. Please go-ahead.
Brandon Oglenski: Hey, good morning, and thanks for taking my question. Brian, you did talk about revenue quality initiatives. I know folks have brought up price quite a bit on this call, but can you talk about not just your pricing outlook. But maybe the mix impact from some of these initiatives you’ve had in the past on small and medium enterprises.
Brian Newman: Yeah, SMBs, Brandon, are very attractive part of the business and we’ve continued to penetrate that market. So that’s been favorable from a mix perspective. We are seeing customers trade-down though from air product to ground. And so we’ve seen that in the numbers. Air was down more than ground volume. So there’s a bit of a headwind there from a customer mix perspective. So overall, we have a customer mix impact as well that’s going on, we’re gliding down with our largest customer. So there is a shift there. That tends to help from an RPP perspective.
Carol Tome: No, it’s interesting if you go back to 2019, our volumes by the same as in the third quarter as it was back in 2019. But our SMB mix has moved from 23% to 29%. And our net revenue per piece has moved from $9.99 to $12.54. So we’ve been laser-focused on improving the revenue quality in our business and we will continue to do that. Value is defined by what the customer is willing to pay for and we are improving our experience every day. A good example of that is delivery photo. We’re now 92% of all of our residential drops are photographed which is creating a better experience for our recipients for our customers and for us candidly. We’re leaning into simplifying the experience of how does that work with us and we’ll talk to you about the widgets that we have with DAP or improvements that we’ve made in our claim process.
You see our net promoter score now in the high 40s, so we believe that experience because it helps grow the revenue quality and we’re going to continue to do that.
Brandon Oglenski: Thank you.
Brian Newman: Thanks, Brandon.
Operator: Our next question will come from the line of Brian Ossenbeck of JPMorgan. Please go ahead.
Brian Ossenbeck: Hey, good morning. Thanks for taking my questions. Maybe just two quick follow-ups actually. Can you talk about the pace of getting the share back, is you go into the fourth-quarter. Do you think, perhaps, you have the lower-hanging fruit easier ones to convert back, do you think that those came back sooner and maybe the pace from here just little bit harder. And then on the buybacks, you mentioned you’re cutting your list your staffing the buyback for the quarter. You’ve got two acquisitions targeted. I just wanted to make sure I was clear in terms of what these are, if those were the Happy Returns and MNX or if there is potentially something else that was on the horizon.
Carol Tome: We have nothing else planned, Brian, today. So we’ll be buying MNX and Happy Returns this quarter, and it’s about $1.3 billion in total that we’ll be spending on those two companies. In terms of the pace of getting share. As I mentioned earlier is accelerating because of the fact that the peak is nearly on us. So people want to come into the network. Here’s the truth though. It does take time to come back in. I get weekly updates Fernando and the team, from Kate and the team about how is the volume coming back in. And I see that, oh, we’ve gotten a handshake. We’ve got an agreement from a customer that’s coming back in. And then I see it takes 30 days to get it back into on-car. And so now I’m like I want photos when it’s on car because I want to make sure that’s actually in the network.
And that’s what we’re getting. We’re having some fun with that actually because we’re seeing it. picked up from our competitors. That’s always done when you’re picking up volume from your competitors. So it accelerates.
Brian Ossenbeck: Okay. Thank you.
Brian Newman: Steven, we have time for one more question. Okay, with no further questions. Thank you for your time and have a good day.
Operator: Ladies and gentlemen that does conclude our call for today. Thank you for your participation. You may now hang up.
Brian Newman: Thank you.
