- September 11, 2014
- 9:20 am
- John Caltagirone
- no comments
Logistics News: Even as they Increasingly Partner for Branded Services, UPS and FedEx Say Recent Major USPS Price Cuts Not Fair
The struggling United States Post Office continues to look at its parcel delivery business as perhaps the key path to some level of financial viability – and it is using significant price cuts to wrest share away from market leaders UPS and FedEx.
The latest USPS pricing initiative began in August when its government regulators gave it the OK to lower prices by as much as 58% on certain Priority Mail packages for customers shipping at least 50,000 parcels a year.
UPS and FedEx say the pricing moves are unfair, claiming the USPS is using its monopoly mail carrier status as leverage to be able to offer the lower rates.
That would of course represent a very discount to shippers, and be especially attractive to ecommerce outfits struggling with shipping costs and getting their own operations into the black. Significantly lower shipping costs would obviously also make it less painful to offer free or highly discounted shipping to entice buyers to check out with those on-line carts.
The cuts are substantial indeed. Before, for example, a 10-pound package shipped 500 miles by the post office cost $14.66 for its biggest customers. That dropped to just $7.40 on Sept. 7.
The Postal Service is obviously betting that it can win enough new business to make up for the lost revenue from existing shippers taking advantage of the lower rates. And the Postal Service needs the money. Not only does it continue to lose money quarter after quarter as traditional mail volumes tank, it faces huge pension obligations, says it needs another about $10 billion for new trucks and new package sorting equipment.
http://www.scdigest.com/ONTARGET/14-09-09-1.PHP?cid=8468&ctype=content