Parcel Shippers: New USPS Priority Mail Undercuts UPS and FedEx Pricing!
Through careful evaluation, shippers that add the U.S. Postal Service to complement private carriers like FedEx and UPS can significantly drive down costs and improve service.
Package growth is the Postal Service’s greatest hope to maintain solvency. Apart from direct mail, the only shining star within all the USPS business segments is Shipping and Package. For the first nine month of its fiscal year (Oct. 1, 2013 through June 30, 2014), the Shipping and Package segment increased volume 8.5 percent and revenue 9.7 percent. Within the segment, Parcel Select is leading the growth with an increase in volume of 12.8 percent and revenue growth of 25.9 percent in the past nine months. Next is First Class Packages, up 11.7 percent in volume and 19.8 percent in revenue for the same time period.
So why the growth? Competitive services at competitive pricing. The Postal Service now offers several pricing options depending on volume and how you manifest packages. Pricing options include the following:
- Retail: No additional discounts from published rates; available at all postal service counters.
- Commercial Base Pricing (CBP): Discounted pricing for users of PC Postage or other electronic postage manifesting.
- Commercial Plus Pricing (CPP): Deepest off-the-shelf discounts offered to high-volume shippers with minimum volume requirements.
- Negotiated Services Agreements (NSAs): Custom contracts.
New Priority Mail Pricing for Volume Shippers
The Postal Regulatory Commission (PRC) recently approved new Priority Mail CPP (effective Sept. 7, 2014), with discounts as much as 57 percent more than previous CPP pricing. All CPP changes are isolated to the 3 pound to 40 pound range and zones one through five only (see table one below):
USPS Priority Mail at new CPP is less expensive than the FedEx and UPS list rates for ground services, but only for certain weights and zones (lighter weights and inner zones). Table two below compares net freight rates (new Priority Mail CPP compared to FedEx/UPS list rates for ground). Zones run across the top, weights down the first column. Green-shaded cells show USPS CPP advantage over UPS and FedEx ground list pricing.
Rob Martinez is the CEO of Shipware LLC, a professional services firm that transforms businesses through intelligent distribution solutions and strategies. Rob has helped some of the world’s most recognizable brands reduce parcel shipping costs an average of 25 percent through contract negotiations, rate benchmarking, modal optimization, invoice audit and other savings vehicles. A cum laude graduate of UCLA, Rob has 20 years of transportation industry experience, including executive positions at DHL and Stamps.com, in addition to his work as an outside consultant since 2001.