In a recent interview, the founder of Amazon, Jeff Bezos, credited the US Postal service for enabling his company to become what it is. Like seemingly everything today, this sentiment will certainly set of a new round of politicizing what was once the boring segment of home delivery.
Today, the USPS - and other postal services - are now best viewed as an open source platform for e-commerce merchants. The USPS enables innovative e-commerce merchants to grow.
Postal Communications to Connections
It is difficult to conceive today but the postal service once served the critical function of facilitating communications enabling people from virtually anywhere to send a letter to virtually everywhere. Now, rather than delivering communications, the postal service is facilitating physical connections.
Postal parcel delivery serves as the physical connection in our increasingly virtual world.
National networks with strained international connections
The international connections between national post offices is being tested by the need to update legacy "terminal dues" rules. As the rule changes are discussed at the global (United Postal Union) level, the outcome is clear: National post offices will have greater control over what they can charge to other national post offices.
To the USA, efficient high volume parcel processes are possible via independent Express Consignment Carrier Facilities (ECCF) and duty free Section 321 processes. These processes allow shippers from around the world to gain duty free express clearance for low cost regional ground delivery via the USPS. Contact our parcel logistics experts to establish high volume parcel import processes to the USA, Mexico, Canada, UK an and Europe.
Postal versus private carriers: Complementary competition
Success in parcel delivery can be summed up in three words: Scale, scale, scale.
In fact, national markets are dominated by a few mega-large carriers plus the local postal service. In the USA, for example, the dominance of FedEx and UPS are countered in scale only by the USPS.
Even with the massive scale of Amazon, FedEx's CEO Fred Smith "does not consider Amazon to be a peer competitor."
Public postal services provide a shared platform that USPS serves as a public utility that benefits smaller merchants.
The USPS will remain the preferred last mile delivery solution for the majority of e-commerce merchants for the foreseeable future.
Shared Platform: Main street redefined.
In the way merchants used to share space on main street, the virtual sharing of platforms (Fulfillment by Amazon, Shopify, eBay - for example) - along with USPS - serves as today's main street.
From main street, to the mall to.... the mail?
As main street moved to malls, anchor tenants - such as Sears or Macy's - were needed as a base to attract boutique sellers. And now, as retail has transferred from malls to online, the USPS relies on mega merchants for volume to then be able to offer low cost access to specialty sellers (i.e. everyone else).
While the mega merchants will continue to dominate e-commerce, there is a growing segment of small merchants who benefit from lower unit costs made possible by platform sharing.
Interested in setting up secure high volume parcel import processes to the USA, Canada and Europe?
Well paying jobs with benefits
Labour intensive parcel delivery companies seek lower costs by minimizing pay and benefits to employees as much as possible. Despite this, UPS, FedEx and USPS offer relatively good pay and benefits. But the competitive pressure is forcing companies - namely FedEx Ground and Amazon Logistics - to use "independent contractors."
The use of independent contractors lowers to cost for regional and other ground carriers but is controversial as it breaks from the traditional full time employee model.
Public inefficiencies versus Shareholder Profits
As even postal advocates concede, postal services tend be less efficient as the decision making is heavily influenced by political - versus business - rationale. More efficient private carriers are driven by shareholder demands that are best met by market dominance that supports yearly price increases (that in the US often exceed the rate of inflation).
Control the market. Control prices
FedEx and UPS customers have no choice other than to accept the annual price increases that are systematically applied every year. The actual published increases of carriers - which themselves most often exceed inflation - are supplemented by the more subtle (yet often more costly) adjustment to surcharges. The USPS provides some competitive balance versus the power of two mega carriers.
USPS: Unimaginable losses but positive operations
In recognizing the benefits of public parcel platform and universal access to the USPS, the public debt being incurred by the USPS (and other major national postal services) must be acknowledged. The USPS has accumulated massive losses that - while largely the result of legacy employee costs - must eventually be dealt with.
Most analysis agree that the USPS has a positive operating margin for their parcel delivery service and that their legacy costs will require action from congress.
The shipping public has benefitted from the incredible efficiencies and competitive spirit of private carriers. The intrinsic advantages of the postal service must be balanced to ensure they do not unfairly intrude further into private market and discourage innovation and further efficiencies.
The American public has a generally positive attitude toward the USPS and political opposition from such things as branch closures and service cutbacks makes it difficult to achieve meaningful efficiency gains.
FedEx, UPS and USPS: 3 Companies, 1 eco-system
For now, FedEx, UPS and USPS serve and benefit each other. UPS, FedEx and USPS are more than just competitors, they are also each other's customers. UPS and FedEx are among USPS largest customers for their Parcel Select Service. Alternatively, USPS is a large customer for FedEx and UPS air services.
If there is to be a disruption in the parcel delivery network, it will be from an outside company (namely Amazon), regional carriers, and technology.
E-commerce: Global focus on local solutions
The flood of new creative and innovative e-commerce merchants is made possible largely through the shared platforms - including access to low cost USPS last mile delivery solutions.
Jet Worldwide helps international merchants access the American market through combining high volume (section 321 ECCF) duty free parcel clearance with low cost last mile delivery solutions.