Experts Give New USPS Ground Service Thumbs Up

USPS delivery vans

The U.S. Postal Service this week launched a new service called Ground Advantage that seeks to win back some of the parcel volume lost to FedEx and UPS when the major carriers insourced much of what they once handed off to USPS Parcel Select Ground, which is being folded into the new offering.

Ground Advantage promises 2-5-day delivery within the continental U.S., compared to the previous service level standard of up to 8 days for its previous ground offerings. The other services being eliminated are Retail Ground and First-Class Package. Prices will be lower compared to the legacy services, with the USPS looking to the new offering as a revenue driver to bolster its challenged economics.

Ground Advantage will handle packages up to 70 lbs., focused on those up to 25 lbs., whereas before its ground services had a sweet spot of 5 lbs. or less. This makes it more attractive to a much wider swath of shippers, and more competitive with the other majors.

Asked how this can be achieved, the USPS pointed to its logistics, facilities and fleet upgrades, as well as converting 125,000 workers from part time to full time. On the logistics side, for instance, it is consolidating mail and package shipments to gain efficiency.

Postal officials stressed how Ground Advantage is competitive both in terms of pricing and performance with the major carriers, noting especially the lack of fuel, residential and weekend surcharges. They also said network improvements made since 2021 under Postmaster General Louis DeJoy’s 10-year Delivering for America overhaul plan are enabling the new capabilities. Ground Advantage does include “non-standard fees” for oversize packages that range from $4 to $15 per item.

“It’s a tremendous opportunity to win more business, including B2B,” said Jakki Strako, Chief Commerce and Business Solutions Officer and EVP for the USPS during a media briefing. “It matches up very well with our competitors.”

Strako said a combination of factors made this the perfect time to launch Ground Advantage, including over-capacity in delivery networks, economic uncertainty and an ongoing focus on getting product closer to customers. The news also came on the heels of USPS price increases going into effect on July 9.

“Businesses have been whipsawed, and we see a pullback as they redefine their fulfillment and returns strategy,” she said. “They’re taking a fresh look at how they ship, who with and how they organize their supply chains. They’re seeking a trusted, reliable and affordable solution that provides their customers with a great experience at the point of delivery.”

Asked about USPS’s ability to handle any overflow should 340,000 Teamsters walk out on UPS come Aug. 1, Strako said they’re ready. “We’ve done a lot of work with our network and employees, and we’re well-positioned to handle any additional volume,” she said.

Steve Monteith, Chief Customer and Marketing Officer and EVP of the USPS, said the main benefits of Ground Advantage were pricing predictability, including the absence of surcharges, and USPS’s network of thousands of entry points.

“We really see it as the tip of spear in terms of customers think about us differently and using us more, with Ground Advantage as a classic halo product.”

Monteith said there will be instances where Ground Advantage is just as fast and cheaper than Priority Mail, the express delivery option with a 1-3-day service guarantee. But customers whose primary need is speed will still choose the latter. “Commercial and retail customers need to pick the one which meets their needs in terms of speed and service,” he said.

Strako gave examples of Ground Advantage service levels, saying 61% of the continental U.S. could be covered from Boston in 2-3 days; adding a second location in Salt Lake City expands that coverage to 93%. She also said a 10 lb. package shipped from Indianapolis to Dallas would cost $12.87 and arrive within three days.

Shipping experts were generally positive in their reactions to Ground Advantage, although some said it will take time to prove out in terms of meeting the service level commitment. While the USPS touts its performance improvements, including an average national transit time of 2.5 days, the brown and purple fleets are still perceived as more reliable.

There was also general agreement Ground Advantage played better to smaller shippers tendering well under 1,000 packages a day than for enterprise customers who can command better rates through volume with the duopoly.

Joe Wilkinson, VP of professional services for Intelligent Audit, said the fact that many shippers feel “beat up” by the duopoly over rate increases, coupled with the enhanced capabilities of Ground Advantage, should drive more toward the USPS option.

“They’re looking for alternatives and carrier diversification,” Wilkinson said. “If the 2024 general rate increases come in high as many are predicting, and which I think would be a mistake, this will only increase adoption. Nothing invites competition like high margins. UPS and FedEx have opened a door by shining a spotlight on their margins for the last few years. The USPS looks to be trying to step through.”

Asked about the USPS network improvements helping make Ground Advantage work well, Wilkinson said technology and contracting prowess “are areas where the USPS has stubbed its toe in the past.”

“Operational effectiveness, if not efficiency, is usually pretty good,” he said. “I think they’ll be able to execute, a few out of the gate bugs notwithstanding.”

Wilkinson said the non-standard fee makes Ground Advantage best suited for ecommerce SMBs that ship small packages, such as apparel, consumer electronics and health and beauty. “Here the additional fees can be avoided, and the disparity caused by the absence of residential surcharges will cause the highest cost advantage,” he said.

While Ground Advantage provides an interesting new option, it won’t dispel the market perception of USPS, said Thomas Andersen, a partner and EVP of supply chain for LJM Group. Still, he said, shippers will give it a good look.

“Historically, they’ve been competitive with service performance, although falling short of UPS, FedEx and Amazon,” Andersen said. “We don’t expect that to change with this service. It is compelling as shippers are seeking additional options, especially with the potential for the upcoming UPS strike on Aug. 1.”

John Haber, chief strategy officer at Transportation Insight, said he’s taking a wait-and-see approach on the USPS’s ability to handle packages up to 70 lbs., given its infrastructure and the progress made to date on its network overhaul. That said, if it does perform they can pull business away from FedEx and UPS, given the rising cost of small parcel shipping, which he called “unsustainable.”

“We are already seeing very large retailers pull back on offering free shipping or increase minimum purchase levels to qualify for it,” Haber said. “There’s no doubt that UPS is going to implement hefty price increases once the labor situation is settled. If the USPS can deliver solid service, then UPS will lose volume.”