New UPS Service Takes on USPS

Some consumer catalogers no doubt feel that United Parcel Service is pricing itself out of the residential ground delivery market. After all, UPS in November announced rate hikes effective Jan. 5 that average 5% for residential Ground service. Plus, UPS’s per-package surcharge for delivery to a residential address is increasing nearly 22%, from $1.15 to $1.40. In contrast, the Atlanta-based parcel carrier is raising its overall Ground service base rates an average of just 1.9%. (UPS is also eliminating its three-year-old per-package Ground fuel surcharge and introducing a fuel surcharge on all air and express services.)

But UPS is hoping to win over consumer catalogers with Basic, a no-frills service introduced in November. UPS does not have a rate chart for Basic but is setting rates on a case-by-case basis with individual shippers. Basic’s rates are “competitive” with those of the U.S. Postal Service’s Parcel Select, says spokesperson Susan Rosenberg, who acknowledges that UPS’s Ground rates are not. Depending on variables such as the number of zones crossed and package weight, sending a parcel via Parcel Select can cost up to 20% less than using UPS Ground.

With the reduced price of Basic comes reduced service. Whereas UPS guarantees Ground delivery time of two to six days, depending on the distance the package travels, Basic takes two or three days longer, Rosenberg says. And while Ground delivery makes up to three delivery attempts before requiring recipients to pick up the package themselves at a local UPS, Basic tries just once. Basic shippers can, however, track deliveries via UPS’s Website as they do with Ground and the carrier’s other services.

For 20%-25% of the packages Basic transports — primarily those that go to rural residences, which are difficult to deliver cost-effectively — UPS will act as a zone-skipper: It will pick up packages at catalogers’ loading docks and drop them off at the USPS destination delivery units DDUs, or local post offices) closest to the recipients. From there, the packages will be delivered by USPS letter carriers along with the regular mail. In urban and suburban areas, however, UPS will make end-to-end deliveries, competing directly with the Postal Service.

Multititle apparel and home goods mailer Brylane is already shifting “more than a little bit of our shipments” to Basic, Russell Stravitz, the cataloger’s outgoing president/CEO, told Catalog Age. “This is not a test. This is a substantial change. It’s a major commitment by Brylane.” The New York-based cataloger, whose 10 titles include Chadwick’s of Boston, Lerner New York, and Roaman’s, had been using the Postal Service for most of its package shipments.

A Sample of UPS Rate Changes

There’s no question that customers shipping parcels to residences via UPS’s standard Ground service are bearing the brunt of the carrier’s rate hike. Below, a sample of the costs to ship a parcel from New York to Chicago.

Delivery service Package weight 2003 rate 2004 rate % change
Residential Ground 2-lbs $5.31 $5.64 6.2%
Residential Ground 5-lbs $6.11 $6.45 5.5%
Commercial Ground 2-lbs $4.16 $4.24 1.9%
Commercial Ground 5-lbs $4.96 $5.05 1.8%
Next-Day Air 2-lbs $25.25 $26.25 3.9%
Next-Day Air 5-lbs $33.00 $34.00 3.0%
2nd-Day Air 2-lbs $9.90 $10.10 2.0%
2nd-Day Air 5-lbs $13.90 $14.30 2.8%
3-Day Select 2-lbs $6.60 $6.70 1.5%
3-Day Select 5-lbs $9.10 $9.30 2.2%

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