With a showdown looming over international postal rates at a Sept. 24 congress of the Universal Postal Union, uncertainty reigns in terms of the United States’ continued participation in the organization, leaving merchants wondering about parcel shipping rates heading into peak season. Consolidators are making contingency plans.
U.S. Postal Service
UPS will not add a residential delivery surcharge this holiday peak season, unlike the past two years, but will add surcharges for larger packages and those requiring additional handling. The company expects to exceed record volume of 800 million packages set last year, with 75% of it handled by automated sortation systems.
The U.S. Postal Service reported a drop in its parcel volume for the first time in nine years during its third quarter, as major customers like Amazon continue to shift business away from the USPS and take on some of the deliveries themselves. However parcel revenue was up thanks to rate increases and a DIM adjustment this year.
Two months after deciding not to renew its contract with Amazon for air freight service, FedEx is now parting ways with the ecommerce giant on the ground as well. FedEx will not renew its ground contract with Amazon when it expires at the end of August, effectively severing the long-term relationship as Amazon grows its own capabilities.
Ever since Amazon introduced Prime in 2005, the company has left everyone else chasing after them, and younger shoppers look for that type of experience everywhere. To succeed, retailers must meet customer demand for an enhanced delivery experience, including whenever possible fast and free shipping and unlimited returns.
Through new partnerships with Michael’s, CVS and Advance Auto, UPS is more than doubling its network of U.S. Access Point locations and adding Sunday pickup and delivery in January for business and residential customers as it engages in an arms race with FedEx. This gives UPS 63,000 U.S. locations, compared to 62,000 for FedEx.
Postmaster General Megan Brennan told the House Oversight and Reform Committee that the USPS will run out of cash by 2024 if reforms are not enacted. Brennan also proposed saving billions by cutting back mail delivery to five days a week and increasing package delivery to seven days, which it already does for Amazon.