• on Jul 21st, 2014 in Delivery & Collection | 2 comments

    The Internet may have eaten into the U.S. Postal Service’s First-Class Mail volume and revenue, but digital devotion does bring good news, too. Package shipping is on the rise, due in large part to the ever-increasing popularity of online shopping. The Postal Service’s future could brighten considerably because of this expanding market, but is the Postal Service prepared to compete effectively in it?

    Our new white paper, Package Services: Get Ready, Set, Grow! , essentially probes that question and comes up with several intriguing findings. As our auditors have noted, the Postal Service has done a good job of managing package growth in terms of mail volume and workhours. But it could do more. And it will have to, not only because UPS and FedEx are offering modernized, end-to-end products and services in response to customer demand, but also because some e-tailers, like Amazon, are expanding to offer their own shipping and delivery options.

    Last year American businesses and consumers spent more than $68 billion to ship packages domestically; the Postal Service accounted for almost two-fifths of the total volume but less than one-fifth of the total revenue. That worked out to an average $3.37 of revenue per package for the Postal Service. UPS’s and FedEx’s average revenue per piece for their domestic packages were $9.39 and $9.70, respectively. The main reasons for the disparity? The Postal Service excels in lightweight and last-mile package delivery, which generate comparatively lower revenues.

    The white paper says the Postal Service could increase its revenue-per-package average by adding new services that customers want. For example:

    • Improving tracking service and package-return service
    • Offering email and text alerts to parcel senders and recipients
    • Specifying time-windows for delivery

    What do you think? How could the Postal Service expand its dominance in lightweight packages to higher-revenue packages? What package services would make you use the Postal Service more than you do now? How much online shopping do you do compared to in-store shopping? 

  • on Jun 23rd, 2014 in Delivery & Collection | 8 comments

    When you think German ingenuity, perhaps high-end automobiles or precision cameras come to mind. Might be time to add individual residential parcel box lockers to the list.

    Don’t laugh. Deutsche Post DHL plans to roll out individual locked parcel boxes to interested German households, and if successful pilot tests in two cities are any indication, the idea could prove to be a lucrative hit.

    The German postal operator is convinced residential parcel boxes are a key element in its strategy to secure more of the growing package business. Deutsche Post sees these home-based parcel delivery lockers as a more convenient option for e-commerce customers, who would otherwise probably have to trek to their local shop or parcel terminal to collect their parcels.

    Deutsche Post isn’t claiming it’s the greatest development since sliced bread, just since the invention of the mailbox. Customers can choose among different designs, sizes, colors, and mounting methods. In addition to receiving parcels, they can also place outgoing packages in the box.

    The parcel lockers are aimed at single-family and two-family homes or those apartment complexes with enough space and easy accessibility for delivery. At a rental price starting at 1.99 euros ($2.70) per month or outright purchase starting at 99 euros (about $135), it’s not clear how many customers will jump on the offering. But Deutsche Post thinks the convenience factor and improved customer experience will win over a number of residents.

    Home parcel lockers are another way the German postal operator is trying to serve customers in a rapidly changing ecommerce market, where double-digit growth is expected to continue for the next 4 years. The U.S. Postal Service is also seizing the opportunities ecommerce provides, and its 20 percent growth in package revenue over the past few years is a testament to the promise of this market.

    Do you think home-based parcel box lockers would work in the U.S.? Would you be willing to pay a small monthly rental fee or buy a box for a more secure home delivery of parcels? If yes, how much would you be willing to pay?

  • on Mar 31st, 2014 in Delivery & Collection | 6 comments

    That ethereal voice was enough for Ray Kinsella to build a baseball diamond in his cornfield in the movie Field of Dreams. But is this approach a sound business model for same-day delivery providers? It seems to be the model they are following: provide same-day delivery in anticipation that customers will eventually consider it standard practice – and actually want it.

    Study after study shows consumers shop online mainly because of low prices and free delivery. Consumers consistently rank “fast shipping” toward the bottom of their reasons for returning to an e-tailer’s website. And yet e-tailers, brick-and-mortar stores, startups, and even the U.S. Postal Service have embarked on the quest to provide same-day delivery service.

    Amazon, Nordstrom, and Walmart are among retailers offering same-day delivery in select markets for orders placed by a certain time. Startups such as Deliv and Instacart are getting in on the action, providing same-day delivery services for retailers in malls or for grocery stores. And, in an interesting convergence, eBay and Google have partnered with traditional retailers not only to deliver their products within hours of a receiving an order, but also to sell them online through consumer-friendly platforms.

    The Postal Service stepped into this market with a short-lived pilot project in San Francisco and now a refined test in New York City. FedEx and UPS do not appear to be jumping in wholly with a same-day service aimed at the retail e-commerce channel, instead offering individual customers some a la cart same-day options.

    Overall, the prices providers are charging for same-day delivery range from about $6 to $10. This is roughly in line with the value consumers place on these services, according to surveys. The price point is good news for consumers, but raises questions about same-day delivery’s sustainability. According to some analysts, many of the same-day services are money losers. Still, as the late Steve Jobs understood well, consumers’ preferences change as offerings are refined. Demand for same-day delivery could increase in the future, which means those already in the market could have an advantage over late entrants.

    Share your thoughts on same-day delivery service. Is this something you want? Are you willing to pay extra for it? If so, how much and for what types of products? Where is the best opportunity for the Postal Service in this market?  

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