As everything goes �e� so, too, do we. Already, we are experiencing a growth in package volumes as e-commerce vendors look for low shipping costs that don�t compromise service levels. The U.S. Postal Service is responding by devoting more of its attention and resources to the parcel industry.
The parcel delivery market, including the international market, is expected to expand significantly. Today, expedited package mail revenues total $6.7 billion. A year from now, we anticipate that figure will rise to nearly $7.6 billion and by 2002 it will exceed $8.1 billion. Total overall market revenues and volume are expected to continue growing at approximately 4.9% and 3.3% a year, respectively, until at least 2004. The exploding Internet market will fuel much of this growth. The Postal Service, based on its inherent strengths, is in an advantageous position to increase its share of the parcel market.
As the Postal Service charts its course for the future, we find ourselves in a solid position. The Postal Service delivery network is already solidly established, offering access to every business and residential address in the country, six days a week. However, as you�ll see, we are not relying on this factor alone. The Postal Service has detailed plans for making its products the number one choice of shippers.
Price Setting
Price is currently the leading competitive differentiation for the U.S. Postal Service, particularly with Priority Mail. While competitors consistently raise their rates annually, the Postal Service has maintained low prices for the past several years, staging modest increases with rate cases approximately every three years. The Priority Mail pricing strategy will highlight the �best value� and simplicity of the USPS� existing prices and features. Since FedEx and UPS have converted to distance-based pricing, Priority Mail�s flat rate for packages up to five pounds offers the greatest price advantage versus competitors� published rates in long-distance deliveries.
The pricing for Parcel Select, a new ground delivery service offered in 1999, is designed to provide bulk shippers with the lowest published rates against other ground product offerings. The destination entry products of Parcel Select offer the lowest published rates and are attracting the attention of consolidators and other private carriers. Price reductions are realized through worksharing drop-shipments.
A New Business Unit
Even with the most extensive delivery network and the most competitive prices, the USPS is working to build and maintain customer loyalty through a number of initiatives.
Part of the Postal Service�s devotion to the package industry can be seen in its move to make Expedited/Package Services(E/PS) an entirely separate business unit. E/PS is structured to focus on developing plans and policies designed to increase the Postal Service�s market share within the full range of the package delivery business. Operating as a field unit headquartered in Roswell, GA, the E/PS staff serves as a functional liaison with other Postal Service divisions whose role is to generate growth in the full range of parcel products: Priority Mail, Express Mail and ground services.
If there�s such a thing as positive politics, this is it. The creation of E/PS sends a clear signal to our colleagues in the Postal Service and to the business community at large that we have refocused our attention on the parcel delivery market. The clear message is �we�re back and we�re here to stay.�
Capitalizing on Strengths
Our competitive advantage is the most extensive pick-up, retail and delivery network in the country. This should enable the Postal Service to become a preferred provider for the shipping of package and expedited products to residences and businesses. This strength will be the key to fulfilling E/PS� mission state-ment: We will be the best parcel delivery provider to everyone, everywhere, everyday.
To achieve this objective, E/PS will be a customer- and market-driven organization, closely aligned with the Postal Service�s mission, goals and strategies. E/PS will develop programs and strategies to make the U.S. Postal Service a significant player in the expedited and package market and enroll the support of the overall Postal Service. Over the next five years, E/PS will work to implement objectives and strategies that collaborate with Postal Service management to build and market an information- and performance-based delivery network.
E/PS organizational values will drive decision-making in the development and implementation of all strategies and plans. Those values include:
� Listening to the voice of the customer to provide value and understand needs.
� Generating revenues by providing cost-effective products and services coupled with operational excellence.
� Communicating to the organization what needs to be implemented in the way of agreed-to strategies and plans.
Recognizing Two Major Markets
In the coming years, the Postal Service will need to address both the business-to-business and business-to-consumer markets. To accomplish this, the Postal Service will establish itself as a convenient and reliable delivery service for these markets. We will offer network and process solutions to ensure reliability while maintaining our price advantage. We will make it easier for customers to enter and pay for their mail by increasing our retail options and developing convenient electronic options. We will provide shipping solutions for low-volume, high-frequency mailers that do not qualify for manifesting. A revamped merchandise return program will facilitate returns. Our reposition efforts will provide a distinctive, product architecture that stands out in the marketplace.
We will also improve our ease of use and the marketplace perception of our products using better technological tools, a strong Web presence, links to e-sellers, strategic alliances and a fully integrated Internet shipping solution. We will enhance operations by developing improved merchandise return procedures, evaluating more convenient delivery alternatives (such as evening and Sunday delivery in selected markets) and developing easier acceptance procedures for shippers. These efforts will be supported with strong sales and marketing efforts aimed at creating awareness of our capabilities and enhancing our image.
Identifying the Customer Market
Traditionally, the Postal Service�s segmentation approach has been geographic. Customers were divided by locations as well as by commercial and consumer segments. Within the commercial customer base, the USPS established a hierarchy of customers with different revenue criteria, resulting in the National, Premier and Business customer designations.
The recent Market Segmentation Study, sponsored by Market Research, segments customers using several key variables, primarily industry, size and projected growth. This has resulted in 15 segments, six of which are designated priority segments. The USPS has recently embraced this approach with the goal of delivering marketing, sales and service programs tailored to each priority segment.
E/PS will integrate its cross-functional products and services within the priority customer segments. E/PS will also support customer segmentation by providing sales support materials redesigned to target the six priority segments, reduce inventory, control costs and provide greater flexibility and accessibility for our customers.
Development of Special Services
In today�s market, customers require value-added features for the shipment of their products and merchandise. With the abundance of feature options available, differentiation in the marketplace is simultaneously more important than ever and more difficult to sustain. The battle for market share between the USPS and its competitors is often based on what each company�s respective product can and cannot do. Coupled with the �ease� of switching from one service provider to another, it is imperative the organization systematically implements innovative features that meet and exceed customer expectations.
The USPS currently offers some unique feature options such as Saturday delivery at no additional charge and Electronic Merchandise Return. However, other features such as guaranteed service and flexible pick-up, have essentially become industry standards that are used by customers to differentiate between the USPS and its competitors.
The launch of Delivery Confirmation service was one of the most significant achievements for E/PS during 1999. The service effectively met the expressed needs of both business mailers and consumers for timely information regarding the delivery status of their packages. Following this success, Signature Confirmation service, which will provide Delivery Confirmation customers with access to optically stored signature images, is slated for national implementation this summer. The feature will be available for Priority Mail and Parcel Post services.
The Signature Confirmation option will be available only in conjunction with Delivery Confirmation and will offer customers the added option of having the recipient�s name and signature captured electronically along with the electronic confirmation of delivery. Mailers will be able to obtain a hardcopy signature via fax, mail or electronically. Requests for hardcopies may be made through a call center or via the Internet. The actual signature will be generated automatically from a central database.
Future Services Unveiled
The goal of E/PS is to develop lasting brand loyalty by providing value-added features that enable the organization to effectively build relationships with customers and grow market share.
Services planned include:
� Signature Confirmation Service
� Same Day Service
� Sunday/Holiday Service
� Flexible Pickup & Delivery Options
� Free Pick-up for Residential - 10 or more pieces;
   Business - 50 or more pieces (with manifest)
� Guaranteed Service - Same Day, Next Day and Two Day
Addressing International Shipping
The international market offers opportunities for carriers to increase volume and revenue growth due in part to deregulation, the breakdown of borders, economies of scale and scope as well as the Internet. Alliances are necessary to capitalize, as fully and as quickly as possible, on all market opportunities and to meet customer demands. Strategic alliances with other providers of distribution services enable us to increase market share without taxing our current distribution centers or transportation networks and without requiring significant capital outlays. We plan to continue to identify opportunities for alliances and, when it makes good business sense, facilitate alliances between the Postal Service and other organizations and companies.
International alliances will allow us to compete globally. Strategic retail alliances, both physical and virtual, would expand our retail presence, making it more convenient for our customers to do business with us. Strategic e-commerce alliances will facilitate our ability to take advantage of this rapidly expanding market segment. All of these contribute to a greater market presence at a reasonable cost and at a moderate risk.
Priority Mail Global Guaranteed (PMGG), which was introduced in 1999, is positioned as the USPS� premium level of international expedited service designed to compete with US export market leaders FedEx and UPS. In order to provide truly competitive service standards, such as day-certain delivery guarantees and online tracking and tracing, the USPS entered into a strategic alliance with global express package delivery leader DHL Worldwide Express, Inc. From USPS retail sites, non-dutiable documents (business and private) are transported via the USPS Eagle network to DHL�s export gateway at JFKAirport. These mailpieces are then securely handed off for air transport and final international delivery.
Future plans include delivery to more countries and territories, additional acceptance retail sites as well as acceptance of dutiable/merchandise items.
Evolving to Meet Future Needs
One of the principal tasks facing E/PS is not only defining a network that will be able to deliver the service performance that future customers will demand but also meet the challenges that our product plan lays out. In the future, the marketplace will buy a delivery commitment without thinking very much about how the commitment is reached (i.e., air or ground).
More than 90% of total package volume is concentrated in 32 major metro areas and their market areas. E/PS is working with postal operations to align the processing network with these major market areas to support the incredible growth of Priority Mail.
Research shows that surface transportation can meet 75% of all package delivery transit time requirements. This plan supports the emerging new concept in the package industry: one nationwide time-definite product on one integrated truck and air line-haul network. For the 25% that must fly, network proficiency will be enhanced by the use of dedicated air trans-portation to the greatest economical extent possible. The necessity of a dedicated air network is due to the unpredictability and low reliability of on-time performance of commercial passenger air carriers.
The Links to Customers
E/PS has improved customer access and ease of use, both electronic and expanded access, through the recently updated and Web sites. Both internal Web development as well as vendor applications will provide Internet access to API Web tools for business Web sites and package services such as printing shipping labels and Delivery Confirmation barcodes. In addition, alliances with Commercial Mail Receiving Agents will provide more convenient package drop-off locations, primarily forSOHO, small business and consumer customers. For bulk shippers, electronic manifesting will facilitate the tendering of packages to the USPS.
The Postal Service is positioned to be the major player when it comes to supporting the e-commerce industry. Considering that as e-customers become more comfortable with e-shopping, the demand for home delivery will increase significantly. UPS, FedEx, RPS, DHL and Airborne are attempting to hold and/or expand their presence in this e-business. However, no other parcel delivery service touches every business, every household, everyday, everywhere like the USPS. The bottom line is the Postal Service is the �Gateway to the Household.�
With an extensive and expansive network already in place and prices well below those of competitors, the U.S. Postal Service is already the carrier of choice for many smart shippers. Current initiatives will allow us to continue to provide a superior value and ever-increasing service levels to parcel shippers.
Jim Cochrane is the associate vice president of Marketing for the U.S. Postal Service�s Expedited/Package Services Group. For more information, please visit