The Postal Service is leveraging the flexibility afforded by the new pricing regulations under the Postal Act of 2006 by going after a bigger share of the highly-profitable and highly competitive package business. How are we going to do that? By pressing our home-court advantage we touch every business and household in
Our package shipping options have become increasingly popular with consumers and small businesses. Now we have the freedom to negotiate prices and customize solutions that will help us earn the business of more large-volume shippers as well. Competition is good for everyone; it makes us even better because it means more choice for package shippers.
If you havent looked at the Postal Services ground shipping options recently, now is a good time. Every year, more packages are going into the household thats our sweet spot. And thats why we created Parcel Select in 1999. We knew businesses were looking for an economical way to get packages to consumers, and the Internet and online shopping were taking off. More light-weight packages were being shipped and they were going to more destinations, decreasing the stop-density and profitability for the private carriers. These same packages are very profitable for the Postal Service when they are dropped at our Post Offices for last mile delivery.
Last year, hundreds of millions of Parcel Select packages were dropped off at Post Offices. Traditional consolidators such as APS, Blue Package, Newgistics and Parcel Pool have been growing in popularity and continue to expand their networks. And our traditional competitors are dropping off more of these packages for us to deliver than ever before. Theyve branded our Parcel Select as FedEx SmartPost, DHL@Home and UPS Basic.
Parcel Select provides special features that are important to shippers, such as up-front estimates of delivery times, email notification to customers and end-to-end tracking with electronic data interchange.
Parcel Select also has the advantage of the Postal Service customer reach. The U.S. Postal Service is the only delivery service that visits every address in the nation 146 million homes and businesses. In fact, we deliver nearly half the worlds mail. Attractive domestic rates apply to addresses in
Were providing world class service. Packages that are dropped off early in the morning receive same-day delivery, and packages that hit our docks in the afternoon go out the next day. Most of those packages are delivered the first time we take them out. For those that arent, we offer free convenient re-delivery which is free even on Saturdays. For those customers who would rather pick up their packages when they are out doing errands, our Post Offices are conveniently located in the towns and neighborhoods where they work and shop. And everyone knows where to find their local Post Office.
One of the primary reasons Parcel Select is growing is because of the low cost. Prices for Parcel Select packages dropped off at a Post Office (Destination Delivery Unit or DDU) range from $1.47 for a one-pound package to $4.00 for a 70 lb package. A typical five-pound package can be delivered for $1.71. As with all Postal Service shipping choices, there are no back-end surcharges, such as fuel, residential delivery, extended area locations and bad addresses fees, just to name a few. If you are using Parcel Select through a third-party logistics provider, there will be additional costs for transportation and value-added services. Whether you use this product through a regional consolidator or through FedEx SmartPost, DHL@Home or UPS Basic, you will benefit from the new Postal Service pricing incentives that are effective on May 12 2008.
There will be two types of pricing incentives for Parcel Select packages that are dropped off at Post Offices for the last mile of delivery:
Declining Block Price Incentives: These incentives reduce prices for shippers who spend at least $5 million in total Parcel Select postage and who increase their volume of Parcel Select packages year over year. This incentive is in the form of an end-of-year rebate ranging from .25% to 1.5% off the price for packages that were entered at the DDU.
Growth Incentives: These incentives reduce prices even further for shippers who spend at least $5 million in total Parcel Select Postage and who increase their total volume as well as the total volume they drop at the DDU year-over-year. This incentive is also in the form of an end-of-year rebate. New volume dropped at the DDU qualifies for a discount between two percent and 14%, depending on how much postage the shipper spends and how much additional DDU volume they generated.
No one can deliver packages into the neighborhood better economically than the Postal Service. Were at every business and household every day six days a week.
And our capabilities arent just at the Last Mile. Now were more competitive at the First Mile as well Package Returns.
We created Parcel Select to press our home court advantage: Were at every home and business in America six days a week with reliable service at an affordable cost. Parcel Return Service is the companion product to Parcel Select, providing a quick, easy and convenient way for consumers to return packages at a very low cost. Return labels can be provided with an order, by email or through a merchants website.
The need for reverse logistics Returns, Repairs, Recalls and Recycles is increasing year after year. There is increasing interest in recycling by environmentally conscious consumers. They dont want to add their discarded cell phones, MP3 players and other electronic gadgets to the nations landfills. Theyd rather recycle them. In fact, the Postal Service just launched a pilot Mail Back program that lets customers discard these items. With this program, postage is paid by the companies recycling these products.
And no one can take a returned package out of the household better than we can. Thats because of the convenience! Merchants and Internet shopping sites know they need to make returns easy to get repeat business. Its incredibly easy to return a package by handing it to a letter carrier, dropping it in a Postal collection box or taking it to a local Post Office. And like Parcel Select, Parcel Return Service offers en-route tracking to help businesses manage their returns process better.
Delivering more residential packages and picking up more return packages are the new goals for the Postal Service. Theyre smart goals that bring increased value to our customers and to our company.
To help us get even more ground package business, were offering pricing incentives on Parcel Select for volume and for packages that are dropped at the back docks of our Post Offices, where our costs are lower and where we can provide the best service to our customers. And weve lowered our prices for lightweight Parcel Return Service packages that are picked up at our Post Offices by a merchant or their agent. Weve changed our pricing for Parcel Return Service packages picked up at Post Offices (Return Delivery Units or RDUs) to weight-based. That has resulted in a 20% price reduction that will help us attract more users of this product.
But were not stopping there. Soon you will be hearing more about our ability to negotiate contracts for ground shipping, enabling us to match our capabilities to those of our customers a win-win for us and for you.
Jim Cochrane is the Vice President, Ground Packages for the United States Postal Service. He can be reached at jim.p.cochrane@usps.gov.
