• 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 Jul 14th, 2014 in Pricing & Rates | 5 comments

    No one can accuse the U.S. Postal Service of following the pack. It not only dismissed the strategy of pricing packages based on size as well as weight (referred to as dim weight pricing); it actually plans to lower prices for a good portion of its flagship Priority Mail products.

    Few were surprised when UPS recently followed rival FedEx’s lead and announced it would price parcels based primarily on how much space they take up during transport. The new pricing scheme is expected to generate significant revenue for the two integrators. Industry observers were curious to see if the Postal Service would jump on the dim weight bandwagon, or if the agency saw a better opportunity in trying to poach customers with its simpler pricing scheme. Few predicted the Postal Service would lower prices.

    Not all Priority Mail prices are going down, however. Retail prices on Priority Mail flat-rate boxes will in fact increase by 1.7 percent on average, if the Postal Regulatory Commission approves the Postal Service plan. For example, the small flat-rate box would increase 35 cents to $5.95 on September 7, if approved.

    Still, small mailers could save by printing their own labels either from the Postal Service’s Click-N-Ship online offering, or from PC Postage products, permit imprints, or digital mailing systems. Using an online option moves customers into Commercial Base pricing, where they will get lower prices, on average, under the Postal Service proposal. The biggest price cuts – about 2.3 percent on average – would come in Commercial Plus prices, which require a commitment of 50,000 pieces in a year.

    The Postal Service’s Priority Mail has seen solid growth over the past 3 years (25 percent in revenue). But postal officials have indicated they want to capture more business shippers and this price cut is one initiative meant to attract those commercial customers. Some observers think that, even without the proposed price break, the Postal Service would have won customers from UPS and FedEx once their prices increased. But others suggest the reduced rates might entice even more business customers to try the Postal Service.

    Should the Postal Service lower its Priority Mail prices, keep them the same, or raise them slightly given an expected migration from UPS and FedEx? 

  • 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?

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