Moore on Pricing: You need a bigger mailbox

Recently, I had to stop at my post office and get a signature before moving my mailbox about 60 feet down the street. I brought along photos so that the postmaster didn’t have to drive out and survey the area. She was agreeable, but requested that my neighbors and I get bigger mailboxes. 

She explained that this request was in effort to reduce the number of times the postal worker has to get out of the truck to bring small parcels to my door because the old, regular-sized mailbox is too small for parcels. This got me thinking about the broader implications of both the new dimensional pricing systems and the evolving role of the United States Postal Service (USPS) in the future of “last mile” residential delivery. 

In fact, I think “getting a bigger mailbox” is sound advice for all shippers and receivers of parcel freight on order to help improve service and reduce costs. 

As has been reported in Logistics Management and in many forums, 2015 marks the beginning of the dimensional pricing scale for parcels of all sizes—not just over three cubic feet—by the major parcel carriers.

“These new price scales,” says Jeff Eischen, a senior partner at Bird Dog, a parcel freight consultancy, “reflect double-digit increases for many small parcel customers.” The result is a scramble to reconfigure packaging, consolidate into LTL zone skipping, or in the case of at least one major on-line retailer, to start their own delivery service.

This brings me back to the role of the USPS. This organization, heavily burdened with pension costs and work rules, has found a market space for new revenue and a chance to practice some competition with the parcel carriers without changing its fundamental business model. 

By dressing up the post office to look more like a UPS Store and providing tracking and expedited service, USPS is becoming an alternative to the “big two” domestically and internationally. By collaborating to provide seamless residential delivery with the national parcel carriers, the USPS also gains revenue for the most labor-intensive portion of their operations.

Rather then cut Saturday service as proposed just a year ago, there’s now talk of adding Sundays and holidays should the need arise. As shippers and consumers, the strategy of helping USPS emerge as a third competitor in the store-front services will ensure us that a competitor is available to counter the oligarchy of two.

Don’t forget that price increases by the big two have been in lock step for the past few years. By also encouraging regional and local couriers—as well as LTL carriers—to have USPS perform last-mile delivery and pick-up services, we can encourage even more competition in a wide range of package sizes. 

If it has escaped your notice, The Royal Mail in the United Kingdom, the bastion of stodgy government owned postal service, has gone private. The hope is that competition will be introduced.

Meanwhile, private couriers have already suggested that they make deals with Royal Mail for remote deliveries where it’s too expensive to provide services. Like our USPS, the new organization needs to leverage its density of service—everywhere everyday—and collaborate with shippers and carriers to be the interface of choice for e-commerce fulfillment. 

When I suggest “getting a bigger mailbox” I’m saying that shippers need to start a dialog with more potential players to help find better pricing and new strategies for serving the booming demand for fast,
reliable, parcel delivery.