Why USPS is a Viable Alternative to FedEx and UPS

by LJM Group

Citing the fact that the United States Postal Service “cannot wait indefinitely for legislation,” the USPS Board of Governors said last week that it has directed management to accelerate the restructure its operations to further reduce costs in order to strengthen its finances.

That’s good news for merchants who ship direct-to-customer, according to MCM Outlook 2012-13. According to the annual report, 56% of respondents said they felt the USPS is a viable alternative to UPS and FedEx.

The USPS also gained ground as respondents’ choice of primary domestic shipper: While 21.8% said the USPS was its primary domestic shipper of choice, that’s up almost 1% when compared to the MCM Outlook 2011 results.

The USPS continued to grow its package services business in FY 2012, which ended Sept. 30. Revenue from its package business increased by $926 million, or 8.7%, on a volume increase of 244 million pieces compared to the same period last year, according to a press release. Higher consumer spending, higher ecommerce retail sales plus increased marketing efforts drove much of the growth in this segment of the USPS business during the last year.

Ken Wood, president and founder of freight auditing and consulting firm LJM Group, says the USPS has its pros and cons for package shippers.

For example, Wood says USPS is very competitive when it comes to lightweight-residential shipments with low value. Also, the USPS does not have the accessorial charges and surcharges that UPS and FedEx have, such as address correction fee, residential fee and fuel surcharges.

“The USPS has flat rate boxes that select shippers can benefit from,” Wood said. “(But) the drawbacks are a lack of guaranteed time delivery, inferior tracking system, lack of trust when it comes to more expensive, time sensitive items.”

Rob Martinez, president and CEO of transportation spend management firm Shipware, says USPS cannot compete with discounted pricing of FedEx and UPS for the majority of packages.

“If (you are shipping) 3 to 13 ounces, First Class parcel is a terrific choice. Even 1- to 2-lb Priority Mail, or Flat Rate Box Priority Mail, can be an economic alternative to UPS and FedEx,” Martinez says. “However, over 3 lbs., most volume shippers have significantly better discounted pricing through FedEx and UPS.”

Amine Khechfe, general manager and co-founder at Endicia, says it is interesting to see how some shippers Endicia serves are migrating to deferred shipping using consolidators. This is a joint service whereby private carriers such as FedEx SmartPost, UPS Mail Innovations and DHL Global Mail use the USPS for the last mile.

“Both the USPS and private carriers win together,” Khechfe says. “However, when looking at the B2B arena, private carriers are still strong.”

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