DC Velocity - October 2013

within a radius of, say, 100 miles, a distance that may become the norm for e-ship-ments as consumers and businesses demand deliveries sometimes within hours, and merchants increase their distribution density in response. Shipments moving 150 miles or farther will probably be delivered in two days. The typical e-commerce shipment weighs between one and five pounds, with four pounds being the average, analysts say. USPS traditionally excels at moving lighter-weight shipments over shorter hauls, they contend.

What’s more, USPS stands to benefit by not imposing a so-called minimum charge for its shipments. By contrast, FedEx and UPS assess “minimums” on all parcels.

The minimum charges apply even on large national accounts that receive sizable discounts based on volumes tendered. In addition, most of the discounts are skewed toward heavier shipments moving over relatively longer distances, not the lightweight stuff moving in shorter hauls, analysts say. Exploiting its rivals’ pricing behavior could work to USPS’s advantage, they contend.

Yet selling customers on USPS’s pricing advantages may not be all that easy. Mark S. Schoeman, Colography’s president, said many FedEx and UPS shippers either don’t understand how their discounts are being applied, or, if they are aware, can’t sift through their complicated shipping mix effectively enough to get a handle on it. “Shippers have yet to realize the extent to which the minimums are clipping their discounts,” he says.

SAVINGS IN THE NUMBERS

Analysts say Priority Mail could save shippers some serious money. Jerry Hempstead, head of Orlando, Fla.-based consultancy Hempstead Consulting, crunched numbers to compare the per-package cost for a Priority Mail “Commercial Plus” customer—which ships at least 100,000 pieces per year—with the cost of UPS’s ground-delivery service to a residence. He found that USPS’s rates were 20. 8 percent lower for a one-pound shipment, 18. 54 percent lower for a two-pound shipment, 16.78

weight traffic—an e-commerce shipment’s DNA—from rivals

FedEx Corp. and UPS Inc. It also underscores how serious the Postal Service is about increasing its presence in, if not eventually dominating, the e-commerce delivery space. E-commerce shipping in the U.S. business-to-consumer segment grew 32 percent in 2012 over 2011 levels, according to The Colography Group Inc., an Atlanta-based consultancy. The growth rate for 2013 is shaping up to be similar to that of

2012, Colography said.

USPS will no doubt promote the
cost benefits that come with not
having any fuel surcharges or the
array of add-on delivery fees—such
as extended delivery surcharges and
address-correction charges, to name
just two—that often bedevil com-
panies shipping with FedEx and
UPS. USPS will continue to offer
Saturday deliveries as part of the
basic Priority Mail service, some-
thing its rivals do not.

TAILORED TO E-COMMERCE

The service will be sold into business-to-business (B2B) channels as well as the core business-to-consumer (B2C) segment, according to Postmaster General Patrick R. Donahoe. Satish Jindel, founder and head of SJ Consulting, a Pittsburgh-based consultancy, said it would appeal to small to mid-sized B2B customers, though bigger B2B players with large-scale volumes are unlikely to be interested.