The U.S. Postal Service (USPS) could experience a 32% decline in total parcel volume and a 20% drop in parcel revenue should three large customers take most, if not all, of their last-mile parcel delivery business in-house rather than outsourcing it to USPS as they have done for years, according to estimates from a prominent consultancy.
The estimates by ShipMatrix quantify the impact of steps being taken by Amazon.com.Inc. (NASDAQ:AMZN); UPS Inc. (NYSE:UPS) and FedEx Corp (NYSE:FDX) to divert last-mile parcels into their own networks, which are being vastly re-engineered in an effort to deliver last-mile parcels more cost-effectively than USPS can under its popular “Parcel Select” service, in which customers induct large parcel volumes deep in the USPS network for last-mile deliveries by letter carriers to residences and businesses. The objective of the three firms is to merge last-mile parcels with routes where their drivers are already making deliveries, thus building massive package density and driving down costs. The companies account for two-thirds of Parcel Select volume, according to ShipMatrix estimates.
USPS faces a problem on another front, according to ShipMatrix. FedEx and UPS have been aggressively targeting small to medium-sized shippers that are big users of USPS’ Priority Mail two- to three-day delivery service. USPS stands to lose about 10% of that volume due to diversion to rivals, according to ShipMatrix estimates. That would boost the total loss of parcel volume to 34% and revenue to 24%, it said. Priority Mail, which USPS handles from pick-up to delivery, generates four times the revenue per piece compared to Parcel Select. In its fiscal third quarter, the most recent, USPS generated about $2.38 in revenue on each piece tendered under Parcel Select.
The ShipMatrix estimates are based on full-year 2018 figures and include all of USPS’ parcel products.
USPS charges a relatively nominal fee for the Parcel Select service because it is required by law to serve every U.S. address and has fixed-cost routes. The program has worked well for years. It has bolstered USPS’ revenue as it struggles with secular declines in first-class and marketing mail, its two most profitable segments. It has enabled customers like FedEx, UPS and Amazon to serve every address without deploying their own equipment and drivers. It has also allowed retailers to offer shipping to consumers at low or no cost to them.
In recent months and years, however, FedEx and UPS have diverted last-mile business into their own networks. Amazon, a late-comer to the parcel delivery game, has begun doing it as well. The dam broke in June when FedEx announced it would in-source by the end of 2020 all of its USPS business, which totaled 2 million parcels a day at its peak. UPS, which is believed to have in-sourced 35% of all traffic it had tendered to USPS, may eventually head in the same direction. Amazon, if other data points are accurate, has already begun to shift last-mile parcel traffic in high-density urban areas to its own fleet, leaving USPS with deliveries to less-populated locations that it still has to serve but which would be less cost-effective for Amazon to handle.
The effect of the lost business was demonstrated in August when USPS’ released its fiscal third-quarter results. It reported that quarterly package and shipping volumes declined year-over-year for the first time in nine years. In the quarter, shipping and packages generated revenue of $5.4 billion, about one-third of USPS’ total revenue. Volume was reported at more than 1.42 billion pieces.
USPS has been aware for some time that it may lose the three companies’ last-mile business. In an October 2 statement, USPS appeared confident it could weather the storm as more e-commerce traffic comes its way. “We continue to attract e-commerce customers and business partners because our customers see the value of our predictable service, enhanced visibility and reasonable pricing,” the statement said. “Our unparalleled delivery network coupled with the quality and professionalism of our workforce enables us to provide a value proposition unique in the shipping marketplace that even the largest e-commerce players cannot match.”
USPS, which has been involved in Sunday deliveries for years, said in the statement that it hopes to win Sunday business from companies like UPS, which along with FedEx launch Sunday deliveries next year. Gordon Glazer, a USPS expert at consultancy Shipware, LLC, said USPS should be able to downshift its parcel network to account for lower volumes. The real issue, Glazer said, is for USPS to achieve legislative solutions to the problem of its $5.5 billion annual tab to pre-fund retiree health-care costs. Cost improvements should also be gained through a restructuring of a parcel reseller program that was costing USPS about $1 billion a year as a result of pricing abuses, Glazer said.
USPS won an important battle on the international front last week when the Universal Postal Union (UPU), a 192-member body that regulates international postal pricing, agreed to changes in the “terminal dues” structure which determines how much a destination postal system can charge origin posts for processing and delivering incoming mail. Under the compromise agreement, USPS will be able to dramatically raise its dues effective in 2020.
I moved home from Charleston South Carolina I paid to have my parcel shipped by the US US Postal Service. They lost one of my boxes which contained most of my theology books my license, as well as my sermons and they did not care they never did contact me I continuously reached out to them no one tried to even tell me anything. Just because I did not have insurance I paid to have those things shipped they we’re not shipped for free. I have very little respect for the US post office they lost private personal items of mine that I could never get Back.
Was there a tracking number on it? It has to be somewhere. I wish I was your carrier because I would have taken the time to find out everything I could for you. My customers come first management’s request for me to do my job speedily and with no regard for my customers comes very last.
Thank You for your Service Joe Young!
Parcel Select makes no sense. UPS and FedEx both come by my house everyday. Parcel Select just delays my delivery an extra day and I have haul it from the scrammed full mail box. Hooray to anyone who stops using it.jk
Well why don’t you empty your mailbox? You cause the problem. Whiny
Well what about the homes on my rural route that rarely see FedEx or UPS? They get their parcels in a timely manner without paying an exorbitant amount for shipping.
Finally. Someone who knows what they are talking about. If USPS only had to worry about parcel delivery like those other svcs then we could get the accolades rather than the complaints.
Life goes on people. We adjust, we adapt, and we’ll be okay in a society that now demands free two-day shipping much like their $4 coffee. Get over it there will be worse coming as we end this whiny hipster and ninny decade.
This is great news! Maybe I’ll start getting my packages delivered to my house again. I’ve lived at my address for 6yr and up until a year ago, USPS stopped delivering my packages. Apparently they started enforcing an idiotic “No Backing Policy” which means USPS drivers are no longer allowed to use reverse in their trucks. Since I live on a dead end street, I’m SOL. To make matters worse, I have to make a mad dash after work in order to make it to the P. O. before they close at 4:30. I usually get there at 4:28 and then have to rush to daycare to get my kids. This added hurdle has caused a lot of unnecessary stress in my life. I’ve reached out to Amazon numerous times to tell the that USPS no longer delivers packages to my house. Each time they tell me that they’ll make UPS my main shipper for my account. UPS delivers my packages for a month and then it reverts back to USPS.
I can’t wait for the day USPS no longer receives my packages. Good riddance.
UPS needs to go to 2 day a week delivery. Aside from parcels which are to be handled by others, most important things come via email. USPS has turned into a bunch of government workers who perform poorly and act as if having a government job justifies their incompetence. I look forward to the day that USPS goes the way of the pay phone. It is about as useful.
I recently sent a small package
To my daughter in California, as I’ve done a number of times, N/P!🤔
Well it cost me $16.10 to send.
Several days later I got it back
“RETURN TO SENTER, UNABLE TO FORWARD” What!? She hasnt moved, so what’s the PROBLEM!! I went to the P.O.
With package in hand! I explained what happen, told them, my daughter has not moved, it didnt need to be forwarded. The clerk said, “All I can do is re-send it, no extra charge” i said “good”. I went home, call the P.O. where my daughter lived, and talk to the clerk. I explained or try too! She seem to have trouble comprehending (what’s wrong with her!?) what I was saying, finally got her to understand. She wrote down my daughter name & address, She said she’d tell the mail carrier.
Great! (WRONG!) Again several days later, back again! ” RETURN TO SENDER, UNABLE TO FORWARD” I called USPS after waiting on the phone
45 MINUTES. After explaining what happen! I get a case#. To hear back by Friday. Missed their call, on Thurs, they left a voice mail:
“Hi Mr. ***** this is George at the post office in
*********, Missouri. I’m calling about tracking number LW******554C and a mail piece that you’re looking for that you said have you haven’t received yet. When I pulled the tracking information on this this tracking number goes to a mail piece that was addressed to an address in *******, Kansas. So it looks to me like you’re probably gonna need to contact the sender as they’ve either mixed up the tracking numbers or something”. It was the rigth tracking#. I went to my P.O. again! Told the clerk, I missed the their call & got a voice mail. Gave him the tracking#, he checked
Said “they haven’t received it yet” I told him in the voice mail left me, it said, it delivered to an addressing. *******, KS
Asked could he give the address? No not allowed.
Didnt, seem to care enough, that’s where it ended.
I did contact the seller, by Email, several
times, no reply. So I filed a complaint, with PayPal, my only recourse. It pending, as they investigate. It was a valid address, so why??? It cost more & getting worst, Unfriendly service. You hard to find information, put on hold for 45 mins, NO “Call you back, when it’s your turn, so you don’t like your place” like other places.
Mark Solomon don’t know jack about how the USPS work, USPS handles 80% to 90% of the mail and packages going in and out in the USA, 60% to 70% of the mail and packages in this hemisphere and 45% to 50% of the entire glove mail and packages, Amazon has become a preferred online store thanks to USPS, USPS had been offering Amazon preferential treatment since day one and now they used minions like Mr. Solomon to spread there false inf.
You should probably re-read the article and not blame the messenger for the content therein.