Surprise: It’s the United States Postal Service.
Okay, to be fair, you may have known that answer, thanks to the USPS’s recent marketing blitz, which includes national television and radio ads making the bold assertion. One slick 30-second TV spot show customers placing online orders with well-known brands like Harry and David, NatureBox, Thred Up, PetMeds, Bass Pro Shops and Etsy, interspersed with postal trucks and sortation centers fulfilling them.
“[USPS] must be including last-mile delivery in its claims,” guessed Steven Ou, CTO of Touch of Modern, during an interview with Multichannel Merchant.
And that is confirmed by Chris Karpenko, director of brand marketing for USPS.
“Indeed, we’re delivering more ecommerce packages to homes than any other shipper,” Karpenko said. “We identify this through the number of packages delivered to homes every day, and where the orders come from.”
Karpenko said there’s roughly a 60/40 split between larger retailers and small-to-medium businesses using USPS’s parcel services. Many of the SMBs come in through servicing marketplaces like eBay, Etsy and Amazon.
“We’re seeing a lot of growth in our Parcel Select and Parcel Lightweight products for ecommerce, where shipments are consolidated and dropped into the closest destination delivery unit (DDU, i.e. any local postal office within a zip code) for final-mile delivery. Sometimes the companies consolidate the shipments themselves or use a third party to do it for them.”
ShipMatrix backs the USPS’s claim to ecommerce delivery superiority, at least from a volume standpoint. In 2015, its data showed USPS leading with a 56.5% share of parcel volume delivered to residences, followed by UPS with 29%, FedEx with 12% and “other” with 2.5%. ShipMatrix president Satish Jindel notes that USPS’s delivery share includes parcels handled by UPS SurePost and FedEx SmartPost but delivered over the final mile by USPS.
“They’re the largest carrier for Amazon,” Jindel said. “No matter how you look at it, their advertising (about ecommerce delivery dominance) is not false. They’re also the only carrier delivering seven days a week. Too many people talk about them from an old mindset, but it is instinct not based on facts. Our view is based on millions of packages delivered, and the Post Office is not behind but they’re better.”
The USPS’s third-quarter financials also indicate the strong growth of its parcel business, with revenue growth of $645 million or 18%.
So why has the USPS suddenly become the dominant ecommerce carrier? Let’s look at what some merchants have told Multichannel Merchant.
Best bang for the buck
If you’re shipping parcels that weigh from 1-3 lbs., the USPS can be the most cost-effective way to get your customers’ package to them. The value proposition for USPS vs. the major carriers starts falling off when parcel weights go above 3 lbs., shippers and experts say. But the great majority of ecommerce shipments are still in the lower weight range.
Peter Marlenga, director of global operations for mobile accessories seller Tech Armor, says it uses USPS for shipping a lot of screen protectors.
“Pretty much everything we sell is light and small,” Marlenga said. “In that case, we look for the cheapest option, and service level pretty is pretty much the same (as the major carriers) for those kinds of shipments.”
Angie Stocklin, co-founder and COO of online eyewear seller One Click Ventures, said the majority of its packages are in the 3-6 ounce weight range, and “no other shipping service competes with USPS First Class in terms of delivery time and cost.”
“That drove the majority of our decision on why started we started with and continue to use the USPS for the majority of our packages,” Stocklin said. “The USPS price change this year did impact us more than any other, though – we saw a 60 cent increase on a lot of packages. But it’s no comparison, even with that. We’re still paying a lot less than with the major carriers.”
Touch of Modern’s Ou says the USPS is known to be a reliable delivery partner.
“The USPS has been delivering packages forever, and can deliver to places others carriers cannot, such as PO boxes and rural addresses,” Ou said. “Also, the USPS will leave delivered packages exactly where they should be left for the customer. When a carrier has incentive structures [based on speed] in place for its drivers, it can mean missed deliveries.”
Ou also said you know what your true upfront shipping costs are going to be when you deal with the USPS, without hidden fees. He said for example if you’re shipping a first-class package weighing 8 oz. or less, it will cost $2.60. But, Ou said, FedEx may apply additional surcharges may, and you can’t predict when the package will go out for delivery.
A quick cross-country trip
As a startup, San Francisco-based Touch of Modern has its one distribution center in the East Bay.
Ou says San Francisco-based Touch of Modern can ship lightweight packages from San Francisco in 3 days or less to the east coast.
Stocklin said she’s seen a bit of a dip in terms of the average delivery time average for First Class Mail, from 2.5 days to about 3.1 days, “but it’s still a great delivery time for what we’re paying for the service.”
Improved service levels
Many retailers have said they’ve seen improved service levels from the USPS, especially in the past couple of years as it has invested more heavily in scanning and tracking technology.
“For the past 12-18 months we’ve gotten very few, actually near zero complaints from people saying ‘Where’s my package, it doesn’t have a scan,” said Marlenga of Tech Armor. “Before that, when a First Class package was dropped off at the first point of contact, 75% of the time there wasn’t a scan. While with UPS and FedEx you’d see the first scan, the next scan, when it’s at the local hub, on a truck and when it’s in your hands.”
Now USPS has caught up in terms of tracking and visibility, Marlenga said, delivering a lot of confidence that it will get into the customer’s hands. He said they were forced to upgrade in order to keep up with the carriers.
“Before they started investing in better tracking, our warehouse would drop off all our packages at a local USPS hub, and maybe 50% to 75% got the first scan. A fair number of customers would call and say they saw that a label was created four days ago but there was no scan, and ask why we didn’t ship the item. There were increased queries to our customer service department.”
But the lack of such complaints over the past 18 months shows how USPS’s investments have paid off, Marlenga said.
Stocklin said she’s also seen improvements in tracking and visibility with the USPS.
“We’re seeing a bigger percentage of packages with confirmed delivered,” she said. “There are more scans with more accuracy along the way. We do have a newer issue with (USPS) packages initially routed in the wrong direction – I’m not sure if we’re seeing that more often or more customers are calling about it. They end up in the right place but some initial scans are causing confusion.”
Even with the improvements, Marlenga and others said there is still a lingering perception among shippers and consumers of service issues with the USPS.
“I’m very comfortable with the service they offer, but when it comes to second day or overnight service, I don’t believe the everyday consumer is as confident,” Marlenga said. “We’re charging them $20 for overnight, and they often want to ship those FedEx or UPS because it feels more guaranteed to them. I believe it is a perception issue – I buy into it a little, but the average consumer buys into it a lot.”
Thomas Anderson, a partner and vice president of supply chain at parcel auditing firm LJM Consultants, agreed there was a perception issue with the USPS. A bigger problem, he said, was being able to maintain volume commitments to the major carriers if some of it is shifted to the USPS.
“You can use technology to rate shop carriers, but if you fall short of volume commitments, all of a sudden costs start going up,” Anderson said. “Most contracts are built around volume commitments, so you can’t afford to start shifting a sizable amount to another carrier or the value starts falling off.”
Behind the upgrade efforts
Karpenko said the USPS has gone through network optimization and worked hard to make its logistics and delivery more efficient.
“We’re maximizing our airlift, using data analysis to determine how much of parcel volume goes via air freight vs. over the road, and utilizing different types of ground transportation, as well as looking at technology to make our sortation more efficient,” he said.
Like UPS and FedEx, the USPS has also used dynamic routing technology to optimize carrier trips, making them more efficient. It uses data fed back from the tracking system, including the handheld scanning devices carriers use.
Over the past two years, the USPS has deployed 270,000 new handheld devices, including 24,000 at its DDUs and another 19,000 at other postal facilities. The older scanners would require carriers to wait until they got back to the office and set them in a cradle to upload data. The new system provides real-time tracking data, a huge upgrade. Down the road, the USPS envisions extending the capabilities of the devices, including accepting card payments for deliveries.
“These scanners notify the customer when an item is actually delivered,” Karpenko said. “It’s a tremendous shift for us. It’s not only about the technology but the ability to provide the best experience for the end customer.”
Expanding Sunday delivery
As for Sunday delivery, Karpekno said customers love it and adoption is growing fast – and not just for Amazon orders.
“Amazon is certainly a part of it, and we’ve been expanding that relationship,” he said. “But there’s not one retailer or etailer that’s not interested in getting in on Sunday delivery. We deliver fish in New York, we deliver wedding dresses – it’s really a wide spectrum. And we’re onboarding new companies every week.”
Demand for Sunday delivery is being consumer driven, Karpenko said, including the desire for faster fulfillment. It tends to happen much more in urban areas due to the economies of scale from greater density that benefits the carrier and merchants.
From a demographic perspective, consumers taking advantage of Sunday delivery are greater users of ecommerce as well as mobile purchases. “It’s anyone who uses an electronic device and has become more accustomed to shopping and ordering online,” Karpenko said.
Another innovation from the USPS is called Informed Delivery. A beta program, it allows customers to sign up and create a virtual mailbox that gives them a digital notification of incoming letters featuring greyscale images. After being tested with letters, it will be expanded to flat items like magazines and mailers and then to parcels.
“In initial tests we’re seeing a lot of engagement and interaction,” Karpenko said. “In the next phase, tell we can give customers a delivery window, like between 1 p.m. and 3 p.m. so they can be home to receive the item.”