USPS rolls out Priority Mail upgrades

The United States Postal Service (USPS) this week rolled out various upgrades to its Priority Mail offering which it said have the potential to bring in more than half a billion dollars in new revenue in the next year.

The new offerings include:
-scheduled delivery with 1-day, 2-day or 3-day based on package origin and destination;
-improved USPS tracking for all Priority Mail products, with tracking and scheduled delivery information located on customer’s retail receipts and online using Track and Confirm; and
-free insurance for Priority Mail 1-day, 2-day, and 3-day, which will include $50 or $100 of insurance depending on the payment method in the event of if a customer brought it to a retail counter or it was purchased online

“This major upgrade of our Priority Mail products is one of the most dramatic new offerings from the Postal Service that meets the strong marketplace demand for core shipping features at affordable pricing,” said Patrick R. Donahoe, Postmaster General and Chief Executive Officer, in a statement. “We believe this Priority Mail line-up positions the Postal Service very competitively in the shipping marketplace and gives small businesses and other frequent shippers a continued and compelling reason to do business with the Postal Service.”

While the USPS is still struggling financially as evidence by last week’s fiscal third quarter earnings announcement in which it posted a $740 million loss, its Shipping Services group continues to impress, due in part to e-commerce growth. Total Shipping and Packages revenue increased 8.8 percent annually in the third quarter, with a 22.6 percent increase in revenue for the Parcel category and a 16.4 percent increase in First-Class Packages revenue.

Parcel sector experts told LM that these Priority Mail upgrades are positive steps for the USPS.

“These are important changes that should have traction in the market place,” said Rob Martinez, president & CEO, Shipware Systems Corp, a San Diego-based parcel consultancy. “Priority Mail offers many advantages when compared with UPS and FedEx Ground services including:  Free premium packaging, No surcharges, Free Sat Delivery and it’s the best choice to APO, FPO, PO Boxes & US Territories.  Moreover, transit times are improved from 1-5 day Ground service to 1-3 day Priority Mail service (see slide below comparing transit days for shipment originating in Southeast):
The USPS emphasis on Shipping & Packaging services is categorically working.  While Market Dominant & Competitive Products (including First Class Mail) continue to decline precipitously, key metrics for USPS Shipping & Packages services show increases across the board.”

Martinez pointed out that Priority Mail makes up approximately 28.4 percent of USPS’s Competitive Products volume, but more than half the revenue and he said that the USPS been creative on driving value for shippers through varied and innovative pricing formats including Flat Rate Unlimited Weight boxes and envelopes, discounts for volume shippers, cubic based pricing and regional based shipping. 

And his company, Shipware, is finding that many of its customers can reduce costs on a percentage of its UPS/FedEx shipments by as much as 50 percent and maintain or improve transit days. 

Jerry Hempstead, president of Orlando, Fla.-based Hempstead Consulting, said that the Priority Mail upgrade is the smartest marketing thing the USPS has done in quite some time, noting it is a shot fired directly at UPS ground residential and FedEx ground residential.

Hempstead cited things like no fuel surcharge, residential fees and no address correction fees which should be very effective for packages weighing 1-to-ten pounds.

“Now nothing has really changed operationally,” he said. “They are now packaging what was already occurring and that is, for local deliveries, Priority Mail gets delivered overnight. The footprints are not as large as FedEx and UPS one day ground commitments, but its enough and can be effective. The reality is that most packages today are short haul and they are 1to 10 lbs. The USPS have also stepped up to the plate with the insurance coverage and if one is a shipper of size, the USPS will match the $100 coverage the commercial carriers have,

While Hempstead said the marketing for this effort by the USPS is “brilliant,” he said the USPS is not guaranteeing the service, however, whereas UPS and FedEx do. And for most shippers he said there will be significant cost savings on light weight parcels (zone 2) when shipping to a residence compared to FedEx and UPS.