EquaShip prepares to make inroads as a cost-effective option to parcel duopoly
EquaShip aims to provide smaller shippers with cost-savings that are typically only available to large enterprise shippers.
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The parcel sector has a new kid on the block, with this week’s arrival of Seattle-based EquaShip.
The company is primarily geared towards e-commerce sellers and small shippers. What makes it stand out in a parcel duopoly spearheaded by industry bellwethers FedEx and UPS along with the United States Postal Service, according to CEO Ron Wiener, is the ability to offer small shippers price breaks that have historically only been available to large enterprise shippers.
“When the parcel industry was de-regulated 23 years ago, UPS and FedEx gave everyone the same price,” he said. “In the late 1980s, UPS gave a 5 percent discount to JC Penney and since then UPS and FedEx have been in a race to the bottom in going after companies like Wal-mart, Amazon and QVC, giving them bigger discounts every year in the form of 80 percent-plus discounts to the biggest shippers, while treating small- and medium sized shippers infinitely elastic on price.”
And except for the years when DHL was creating some pricing pressure for FedEx and UPS, the duopoly has been able to raise prices at an average of roughly 7 percent per year with little pushback from shippers.
But the advent of e-commerce—and that sector’s overall mix of ground parcels reaching 50 percent being residential versus commercial addresses, with 90 percent residential—has spurned the parcel consolidation industry.
“Big shippers don’t want to pay more for residential deliveries in the form of surcharges,” said Wiener. “They demanded it and that got them into the parcel consolidation business. One out of six parcel packages in the U.S. is going through FedEx SmartPost, UPS Basic, or DHL Global Mail, among others, and we looked at that and saw an up to 6-to-1 difference in price, with millions of e-Bay and Amazon merchants paying much more for transportation compared to the big players. And they are single-point shippers that don’t have fulfillment centers everywhere…and many have gone out of business in an ecosystem that is all about free shipping.”
EquaShip said it is able to serve shippers moving anywhere from one package per week up to 750 packages per week, and along with e-commerce shippers, its customer base is expected to be comprised of manufacturers and distributors, among others.
Shippers using EquaShip can go to the company’s Web site to access an interactive pricing map that allows them to make what EquaShip describes as “apples-to-apples” price comparisons to FedEx, UPS, and the USPS as well as calculate potential savings under various scenarios and not have to crawl through the often complicated pricing tables that FedEx and UPS have.
EquaShip has formed a partnership with Blue Package Delivery, a non-asset based parcel consolidator and carrier who contracts its deliveries through contracts with various regional carriers and delivers shipments and packages of all weights up to 70 pounds.
Wiener said that establishing a relationship with Blue is a major advantage, because Blue, unlike FedEx as an example—who may hold a delivery truck for a number of days until it is full—will push a package through the moment it has it. And he noted that Blue’s IT platform was built by the same vendor that built EquaShip’s.
With this IT set-up, EquaShip acts as a layer that integrates into all the software platforms that small- and medium-sized merchants use, of which there are roughly 150 and EquaShip is currently integrated into about one-third of them.
“When a shipper is looking at FedEx, UPS, or the USPS, we are now the fourth carrier being listed next to those three,” said Wiener. “What was key in getting into this market was striking deals with those e-commerce platforms, order management platforms, ERP systems, or anywhere there is a shipping screen.”
As is the case with most any shipper, price is often the key differentiator, and this is where EquaShip figures to dig into the market share of its large competitors. The company says that it can save its customers between 26-to-77 percent compared to FedEx and UPS Residential Ground retail rates along with savings of 70-to-88 percent compared to international offerings from FedEx, UPS, and DHL.
Wiener said that these savings are due to the fact that EquaShip does not serve large enterprise customers, whom typically require steep discounts that FedEx and UPS provide.
“When you give one set of customers a big discount, you have to charge the other set of customers necessarily a lot more, and that is what the duopoly has allowed FedEx and UPS to do,” said Wiener. “For years, they have matched each others price tables and accessorial fees to the penny and keep raising rates 7 percent per year no matter what, as the customer did not have many other options.”
When asked how the shipping process works for EquaShip customers, Wiener said customers go to the Web site and sign up and let the company know if they want pick ups or drop offs or both. For pick ups, the address is validated and a profile is created with information on what their charges will be, including how many packages are needed for free pickups, which are available if packages are over a certain volume.
Smaller shippers, he said, typically will leverage EquaShip’s drop-off network, which the company is in the process of expanding through retail chains and mail and parcel centers. The goal for the company is to have drop-off locations for every city in the U.S. within a year.
Jerry Hempstead, president of parcel consultancy Hempstead Consulting in Orlando, Fla., told LM that he wants EquaShip to be successful, citing how the parcel marketplace needs another player.
“We have seen parcel pricing go up extraordinarily over the last few ears since DHL announced its exit from the domestic landscape in November 2008,” he said. “The increases are not just the result of fuel and have been far greater than inflation or the CPI. The marketplace needs to give them a try and see if their value proposition works. It’s important that the marketplace do what it can to foster healthy competition and make sure that playing field has a good bench to choose from. If not then expect prices to continue to increase and shippers will be looking at having to raise their prices accordingly or discontinue offering discounted or free shipping.”
About the AuthorJeff Berman, Group News Editor Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman
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