USPS looks to move Standard Mail parcels to competitive products category

The United States Postal Service (USPS) recently announced it is petitioning the Postal Regulatory Commission (PRC) to move its Standard Mail parcels from its market-dominant product list to its competitive products list.

USPS officials said if this is approved, fulfillment parcels would become a lightweight subcategory of Parcel Select, a package delivery service geared towards large shippers.

This proposal was part of the USPS’s exigent price case to raise rates filed on July 6. This case is comprised of four-to-six percent price increases for various products, including its 18 Market Dominant products. These changes, if approved by the PRC, would take effect on January 2, 2011. The PRC’s decision is due in early October.

The USPS said the strategy for Standard Mail small parcels redesign would eliminate confusion for customers by breaking this category into two significant and distinct customer segments—marketing parcels and fulfillment parcels. And it said the main difference between the two products is weight, with Standard Mail fulfillment parcels weighing less than 1 pound and Parcel Select prices starting at 1 pound.

Standard Mail fulfillment parcels are heavily used by companies like Amazon, FedEx SmartPost, LL Bean, JC Penney, and many other large volume shippers of lightweight parcels.

“This is a competitive market and there are other shippers in the marketplace fulfilling this need for packages,” said USPS Vice President, Shipping Services, Gary Reblin, in a statement. “This is a logical change and customers will no longer have to navigate two different products and rate structures for one business need.

Parcel Research President Doug Caldwell told LM this move makes sense, because Parcel Select, Priority, and Express are already in the USPS’s competitive category.

“USPS previously had proposed a fairly hefty (20% plus) rate increase for Standard Parcels, since these parcels are a money loser for USPS, only covering 75% of costs,” said Caldwell. “Even with the increase, Standard Parcels will still be a comparatively good bargain. For instance, the proposed Standard Parcel rate for a 15.9 ounce package will be just under $1.04, vs $1.60 for a 1 lb Parcel Select.”

In its recently-released recently released fiscal year third quarter earning, USPS said it incurred a net loss of $3.5 billion compared to $2.4 billion for the same timeframe last year, with operating revenue at $16 billion, a $294 million annual decline. Operating expenses—at $19.5 billion—were up $789 million year-over-year. This is the 14th net loss in the last 16 quarters for the USPS, with its fiscal 2010 year-to-date net loss at $5.4 billion compared to $4.7 billion at this point in 2009.
Mail volume for the quarter—at 40.9 billion pieces—was down roughly 700 million pieces of 1.7 percent.