Company launches parcel consolidation service

A Seattle-based company has joined the U.S. small parcel fray by launching a service it says will, for the first time, enable small to mid-sized shippers to access low parcel rates that had previously been available only to large-scale users.

The company, called EquaShip, serves as the shipper's main point of contact and handles all billing, customer service, and IT issues. EquaShip doesn't operate vehicles or warehouses, instead turning to its transport partner, Blue Package Delivery LLC, to provide parcel pickup and the line-haul to the U.S. Postal Service (USPS), where the parcels are introduced into the USPS system for the so-called last mile delivery. By law, USPS is required to serve every address in the United States.

The use of parcel consolidators relying on the low-cost USPS network for last-mile deliveries is considered the cheapest form of parcel delivery. The growing use of this shipping model gives merchants the financial latitude to offer customers free shipping on many online orders. It is believed that about half of all online transactions today include free shipping. In the first half of 2011, 62 percent of all e-commerce sites offered some type of free shipping, according to Ron Wiener, EquaShip's president and CEO.

The EquaShip service is designed for smaller e-commerce merchants who normally tender between one and 750 shipments a day, mostly merchandise purchased via the Internet, according to Wiener. These shippers historically lack the package density to qualify for deeply discounted parcel consolidation services, and must instead use the more expensive "retail" services offered by FedEx Corp., UPS Inc., and the U.S. Postal Service, Wiener said.

"EquaShip enables small to medium-sized shippers to ship through parcel consolidators who ordinarily only take on much larger customers," Wiener said. He added that shippers using EquaShip could save between 25 and 88 percent off retail rates for a three-pound parcel, the average weight of an e-commerce shipment.

According to Wiener, EquaShip's savings largely come from piggybacking on Blue's trucking network. Blue focuses almost exclusively on large online merchants such as Amazon.com and has no interest in directly serving the small to mid-sized customer segment, Wiener said. EquaShip procures available space on Blue's trucks, which need to move anyway. Through this arrangement, EquaShip adds package density to Blue's network and helps Blue fill trailerloads that might otherwise ride partially empty.

The need for parcel shipping alternatives, especially for small to mid-sized shippers, has grown more pronounced since DHL Express withdrew from the domestic U.S. market in January 2009. DHL was the low-priced provider, and its absence has emboldened the two remaining players, FedEx and UPS, to raise rates about 20 percent over the past three years.

The two giants have also imposed higher accessorial fees—add-on charges for services beyond the basic pickups and deliveries, and have made it more expensive for businesses to ship bulky, lightweight items under their "dimensional weight" pricing formulas. EquaShip has no accessorials, nor does it use dimensional weight pricing, Wiener says.

Even when DHL was in the U.S. market, though, smaller shippers operated at a pricing disadvantage because their relatively low volumes prevented them from gaining access to the best carrier discounts.

"There has long been a great chasm between the kind of shipping options that larger enterprise shippers have ... and the three limited and costlier options available to smaller shippers," said Rob Martinez, president and CEO of parcel consultancy ShipWare LLC. "EquaShip is coming in at the perfect time with new options that ideally suit the cost and transit time tradeoffs that are so critical to smaller shippers, especially those engaged in online commerce."

Martinez is an investor in EquaShip and sits on its board of directors.