Should USPS Be Charging More for Package Delivery?

It seems Amazon, FedEx and UPS get all the credit for zippy package delivery when it’s really the oft-dubbed “lumbering” U.S. Postal Service that’s likely responsible, according to the Wall Street Journal article “For FedEx and UPS, a Cheaper Route: the Post Office.”
In the article updated on Aug. 4, Laura Stevens says the private companies’ use of Parcel Select services “surged nearly 500 percent, to about 1.29 billion packages in 2013, from about 223 million in 2009.” So USPS, in dire financial straits, is delivering more and more packages even as First Class mail volumes decrease. Stevens reports that the increase in package deliveries for private entities is raising the question of whether the USPS is charging enough for package delivery.

Direct mailers have long known companies including FedEx and UPS use the USPS for the last mile of package delivery. However, Stevens points out that the trip from the post office to the customer’s door is the “most expensive last leg of the delivery.”

Meanwhile, Parcel Select accounts for the plurality of the delivered mail pieces, but the less popular Priority Mail brought in triple the revenue, according to Q2 2014 figures (opens as a PDF).

“Both UPS and FedEx rely on the postal office for the back-end of their cheaper two- to seven-day delivery options, Smartpost for FedEx and Surepost for UPS,” Stevens writes.

USPS averages $1.71 in revenue for Parcel Select packages, while FedEx brings in $1.78 for Surepost, she writes. “Analysts estimate Amazon pays about $2 to mail a package via the Postal Service versus $7 or $8 for UPS or FedEx ground,” Stevens writes. So Amazon started taking packages to USPS.

So is USPS charging enough for package delivery? What can replace First Class mail as its primary revenue source? (opens as a PDF)

Heather Fletcher is senior content editor with Target Marketing.

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