GLAZER: 2019 Industry Trends & Highlights

Caption — Gordon Glazer, CMDSM, CMDSS, MDP, MDC is Consultant, USPS Specialist at Shipware LLC. He can be reached at 858-724-0457 or gordon@shipware.com.

By Gordon Glazer, CMDSM, CMDSS, MDP, MDC —
Shipware

This is an excerpt from the CHARTS article which appeared earlier.

— A lot of changes have occurred in the marketplace and there remains the continued stress of no Congressional Postal reform.

— The Postal Regulatory Commission (PRC) completed the required 10-year review of the PAEA (Postal Accountability and Enhancement Act) and came out the other side relatively unscathed, having weathered challenges from UPS to change the USPS’s method for allocating certain fixed costs between Shipping and Mailing products.

— The much-anticipated Presidential Task Force report on the USPS was leaked and revealed very little. One item that did see immediate attention was the claim that the USPS was losing $1B a year due to poorly written Negotiated Service Agreements (NSA) used by specific postage “resellers”.

It is suspected that Stamps.com, upon realizing they would lose a lot of “Service Revenue,” very shockingly pivoted 180 degrees. They publicly blamed the Postal Service for its reduced future earnings and announced they would give up its NSA discount to open their business to competitive vendors.

— Their stock dropped 50% overnight, followed by another 50% drop.

— Fortune has since shined on Stamps due to the calendar and the International “Universal Postal Union” (UPU) uncertainty.

— Industry rumors indicate the USPS has deferred any action till the Q4 Holiday Shipping season is over for fear of disrupting shipping activity during this critical time.

— Speaking of the UPU, that was quite the scare that forced shippers to look for alternatives. Not a bad thing to look around, as many found better deals through International Consolidators.

+ The UPU issue was resolved and the USA will remain.

+ Parity in rates between domestic shippers will soon occur saving an estimated $.5B a year.

+ Bad news for merchants that ship goods direct from China.

Competitive Pressures

— Both FedEx and UPS announced plans to go to 7 days a week delivery.

+ FedEx going a step further with their intention to keep 100% of their SmartPost shipments in-network rather than hand off to the USPS for final delivery. This is no small number – 2MM pkgs per day that may be out of the USPS network by next Sept.

+ Both also released flat rate programs to compete with the USPS Flat rate offerings.

— Amazon persists as the leading market disruptor with plans to take “Prime” to one day transit. They are in a unique position to make it happen due to their massive distribution network. They purchased more planes and 20,000 vans to grow their own Amazon Logistic Services.

— Expedited Economy Services from 2 of the larger consolidators continue to pull business from Priority Mail by offering 3-day transit at competitive pricing. (Note: the USPS still retains revenue for final mile delivery. What is lost is the more profitable, full network, FCPS and PM.)

— Due these competitive pressures, the USPS took restraint this year to help tilt the scale back in their favor.

+ Rate Shopping software often makes routing decisions and helps the USPS when shippers compare their fully laden costs. The USPS does not charge for Fuel, Area Surcharges and many other “Accessorials” that the national carriers add on after the fact.

+ Non-Linear Changes: The USPS raised rates less in areas where they already dominate, and much more in lanes dominated by small users and consumers (heavier – longer transit) that don’t have access to discounted UPS/FDX rates that large shippers routinely get.

This article is taken from CHARTS: USPS 2020 Price Increase & Impact on Shippers. Click to read