Tuesday, September 9, 2014

U.S. Postal Service Cuts Prices to Win Customers away from UPS and FedEx

The U.S. Postal Service is aggressively slashing prices to attract big e-commerce companies in time for the holidays, aiming to steal business from both FedEx Corp. and United Parcel Service Inc.
Over loud protests from its rival delivery giants, the Postal Service won approval from its regulators in August to lower prices by as much as 58% on certain Priority Mail packages for customers shipping at least 50,000 parcels a year.
The Postal Service says its prices were too high to be competitive. But in documents filed with the Postal Regulatory Commission, both UPSand FedEx say the agency is taking advantage of its status as a near monopoly to unfairly snag a bigger piece of the e-commerce pie.
The price cuts "do not reflect a minor cost-related adjustment in the postage that Grandma will have to pay to send a sweater to young Johnny," wrote FedEx in its filing with the commission in July. "What USPS is proposing is an aggressive push to gain market share in the fast-growing business of e-commerce."
A number of e-commerce shippers are considering or have decided to use the Postal Service because of the price change, said Rob Martinez, president of Shipware LLC, a shipping strategy consultant and auditor. "A lot of shippers are going to take another look at the Postal Service."
The price cutting is just one of the USPS's recent strategic—and uncharacteristic—moves to attract new business on all fronts, including in the U.S. online retail industry, a market that Forrester Research valued at $263 billion in 2013. The USPS also is testing grocery delivery for Amazon.comInc. in San Francisco. It already partners with Amazon for Sunday delivery in more than 20 different markets, a service it would like to expand to other companies. Its CEO, Postmaster General Patrick R. Donahoe, said in an interview this summer that the agency needs to spend about $10 billion on new trucks and new package sorting equipment, though the agency has reported losses in 21 of the last 23 quarters.
U.S. Mail Delivers Amazon Groceries in San Francisco
While the steepest price cuts won't directly benefit consumers, they could make it easier for retailers to continue offering free shipping on everything from toilet paper to shoes to diapers.
The Postal Service in July said it wanted to cut rates, shortly after UPS and FedEx said they were effectively raising prices on ground shipments. Starting next year, both companies will charge by size—instead of just weight—to encourage e-tailers to use smaller boxes, or pay up.
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1 comment:

Anonymous said...

USPS too corrupt