The story on shipping with USPS

Shipping parcels to consumers and businesses is never cheap. But it got more expensive after DHL Express dropped out of the U.S. market and ceased most domestic express and ground operations in late January. Then FedEx and United Parcel Service imposed the highest rate increases in history.

What can you do about it? You might consider adding the U.S. Postal Service to your carrier mix to help drive down costs. Of its $75 billion in fiscal 2008 revenue, USPS generated about 11%, or $8.35 billion, from shipping services. But it's only getting started.

Thanks to the Postal Accountability and Enhancement Law of 2006, which lifted the mandate for uniform pricing for all, the USPS now has the autonomy to develop competitive shipping products and pricing initiatives. And it's going after the express and ground business market segment in a major way.

UNIQUE ADVANTAGES

There's no question that the Postal Service has some unique advantages. For one, it already goes to every door, every day.

And USPS is the only carrier that can put items in mailboxes, P.O. Boxes or residential mail slots. It offers free package pickup six days a week, and has the most package drop-off points in the country.

The prospect of Saturday delivery is another bonus — assuming the Postal Service sticks with its six-day delivery week. Free Saturday delivery amounts to 52 additional delivery days a year.

The USPS is also the only carrier that offers pricing for parcels that weigh 13 oz. or less (First-Class Mail Package) with delivery service standards within three business days. Retail pricing ranges from $1.17 to $3.21 — a bargain compared to $4.57 (plus fuel and other surcharges) for UPS and FedEx Ground service (1 lb., Zone 2 minimum charge).

Here are a few more of the specific products and services the Postal Service is dangling before parcel shippers.

Flat rate products

The USPS has developed unlimited weight products that feature predetermined rates regardless of weight or destination. Flat rate products are available in multiple sizes and shapes:

• 12-1/2" × 9-1/2" — Envelopes
• 8-5/8" × 5-3/8" × 1-5/8" — “Video” box
• 11" × 8-1/2" × 5-1/2" — “Shoe” box
• • 13-5/8" × 11-7/8" × 3-3/8" — “Shirt” Box
• • 12-1/4" × 12-1/4" × 6" — This “Large” box is 50% larger than other flat rate box options

Competitive pricing

Effective January 2009, the USPS unveiled competitive pricing tiers for Express Mail and Priority Mail as follows:

Retail

Standard pricing at Post Office retail outlets

Commercial Base

Discounts for online users (approximately 5% off retail for Express Mail, 4.7% for Priority Mail)

Commercial Plus

Discounts for high volume shippers (approximately 14.5% for Express Mail, 7% for Priority Mail). Commercial Plus replaces the quarterly volume rebate program. Shippers can qualify for Commercial Plus discounts on Priority Mail (100,000 pieces/year) and/or Express Mail (6,000 pieces/year) and receive discounts immediately instead of waiting until the end of the quarter.

New services

In addition to creating new competitive pricing tiers, the USPS has developed customized shipping services, including a new letter-size overnight envelope as well as an Express Mail overnight service.

Through enhancements to Priority Mail Open and Distribute services, drop-shippers can send other classes of mail in two days at a lower cost. Other recent innovations include an asset recovery service, soft packaging for Priority Mail for items such as apparel and other soft goods, and a new induction process for Priority Mail.

The USPS's initial marketing approach to negotiated agreements was to provide incentives based on volumes. Its strategy today is more customized. While the USPS will not disclose details of customized programs, third-party sources report discount ranges of 5% to 20% off retail pricing for Express, Priority and Global Mail products.

AREAS FOR IMPROVEMENT

The Postal Service clearly boasts many strengths as a parcel carrier. But as the USPS freely admits, it still has many opportunities for improvement. Here are a few:

Tracking/reporting

While USPS Intelligent Mail Barcode initiatives promise better package tracking and information in the future, its tracking and reporting capabilities today significantly trail UPS and FedEx.

Service performance

While service performance has improved, USPS on-time delivery performance is not on the level with UPS or FedEx. And guarantees are different.

UPS and FedEx publish delivery times as early as 8:00 a.m. with money-back guarantees. Express Mail offers next-day delivery as early as noon to most major metropolitan areas or your money back. Outside of Express Mail, delivery times for postal products are not guaranteed.

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