January 28, 2011

USPS makes play for regional parcel traffic

Post office unveils service designed to compete with FedEx Ground and UPS standard ground service.

By Mark B. Solomon

The U.S. Postal Service has rolled out a shipping service it hopes will help it make inroads in markets where its presence up until now has been virtually non-existent.

The service, called "Priority Mail Regional Rate Box," is patterned after the USPS's Priority Mail flat rate offering that lets mailers pay the same rate regardless of how much material they stuff into the box. The new service is geared toward businesses shipping packages weighing between five and 15 pounds for short distances (up to 700 miles) and that need to arrive in two to three days.

The service, which was rolled out Jan. 2, takes USPS out of its comfort zone. Traditionally, USPS is competitive for shipments weighing one to five pounds and moving relatively long distances. By contrast, it is invisible in the shorter-distance lanes where nearly half of all parcels move.

Parcel-shipping distances in the United States are divided into eight "zones," based on the distance between origin and destination points. For example, a zone 1 shipment would be destined for a neighboring city from the origin point, such as a shipment originating in Los Angeles and bound for San Diego. A coast-to-coast shipment would be classified as zone 8.

Within the zone 1–4 matrix that the new USPS service will attempt to penetrate, the average length of haul is 200 miles.

The service will be available to USPS's "Commercial Base" customers that book shipments online and to its "Commercial Plus" customers that ship at least 75,000 pieces a year with USPS. The service is targeted to the business-to-consumer market and will not be available at retail post offices. It comes with a delivery confirmation feature at no charge, USPS said.

The post office has set two pricing tiers for the service: One, with a 15-pound weight limit, starts at $4.97 per box. The other, with a 20-pound weight limit, starts at $5.31 per box. Very few shipments will come close to either weight limit, however.

According to USPS, "Commercial Base" prices are, on average, 6.6 percent lower than retail postal prices. "Commercial Plus" prices average about 13.6 percent below comparable retail rates, USPS said.

Gary Reblin, vice president, shipping services, said the new service will compete with FedEx Ground, the ground-parcel unit of FedEx Corp., and UPS Inc.'s standard ground service. Both competitors offer significant discounts for high-volume customers shipping in the short zones.

Reblin said the new service will be priced competitively with FedEx and UPS. "We did a lot of research to come up with the price that we put in the market," he said.

The USPS executive said the new service gives shippers a viable third service option in the concentrated shorter-distance market. "It puts us in the five- to 15-pound category, and it puts us in the closer zones," Reblin said.

Jerry Hempstead, a former top sales executive at Airborne Express and DHL Express, and now head of a parcel consultancy that bears his name, said USPS will have an uphill battle selling the service. Hempstead noted that unlike Priority Mail, FedEx and UPS can guarantee next-day ground service in the shorter-zoned markets at discounted rates that could match or beat the USPS's prices for the new service.

About the Author

Mark B. Solomon
Executive Editor - News
Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.

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