United Parcel Service has its own fleets of planes, custom-designed delivery trucks, and distribution centers, which keep competitors from easily entering the market and obtaining a price advantage.
While UPS is known for its low rates, it is also widely regarded as one of the best service companies in the world. UPS strives to create sources of business uniqueness (product differentiation) to maintain customers in the face of price discounts from competitors. UPS has well-trained personnel and service at all levels (e.g., instant computerized answers to customer inquires). It also provides free computers, printers, and other automated equipment to customers as an added service, which again raises the cost of competing with UPS by a competitor.
On the other hand, UPS is also "infamous" for rough package handling. The UPS package "drop test" requirement for package strength and interior construction is a vulnerability in their product differentiation. Companies that ship fragile items like computers, glassware, and liquids often chose other carriers, even at higher expense. Thus, there may be a niche for smaller companies to enter the package delivery business, if they can provide "kid gloves" treatment of packages.