USPS warns defection of three key customers could hurt package business
The U.S. Postal Service warned today that the multi-year growth of its shipping and package operations could be jeopardized if the three customers responsible for most of the business continue to expand their shipping capabilities and divert business from USPS.
USPS, which made the comments in a quarterly government filing that included its fiscal first-quarter results, did not identify the customers. However, they are believed to be Seattle-based Amazon.com Inc., Memphis-based FedEx Corp., and Atlanta-based UPS Inc.
The three are big users of a USPS service known as “Parcel Select,” where companies induct packages deep into the postal system for last-mile deliveries to residences. In its 2016 fiscal year, about 2.5 billion packages moved under Parcel Select, according to consultancy SJ Consulting. Amazon, the largest user, tendered about 1 billion packages; FedEx, through its “SmartPost” product, proffers about 600 million; and UPS, through a similar product called “SurePost,” moves about 275 million, based on SJ data. The balance came from an amalgam of customers, notably “parcel consolidators” that aggregate packages from multiple shippers for tender to USPS.
USPS prices the service cheaply, in part because it is already required by law to serve every U.S. address and P.O. box, and its letter carriers must serve the routes anyway. Parcel Select is extremely popular with FedEx and UPS customers selling into the business-to-consumer (B2C) channel. In addition, FedEx and UPS have long relied on Parcel Select to meet service commitments without the expense of deploying their own vehicles and drivers to residences.
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