It’s not hard to see why even during one the slowest economic recoveries on record that parcel express and ground activity remains ahead of the curve. This is not represented so much in annual volume gains as it is with service quality and the continued reliability that shippers continue to receive through key parcel carriers.
And while this field of carriers remains limited, with the duopoly of FedEx and UPS continuing its reign, it doesn’t mean there are limited opportunities for shippers to expand and leverage how they approachparcel. On the flip side, however, with such an established duopoly serving the majority of the market, pricing gains for shippers looking for alternatives can be a bit challenging.
Joining us this year to put this dynamic market into perspective are Jerry Hempstead, president of Hempstead Consulting; Doug Kahl, executive consultant of parcel for TranzAct Technologies; and David Ross, transportation and logistics director at Stifel Nicolaus.
Over the next few pages, our distinguished panel offers shippers their unique insight into parcel market trends, the future of pricing, and the role the United States Postal Service (USPS) continues to play in the sector. With 2013 already here, the panel advises shippers to be diligent in how their packages are priced and to keep an eye on the innovative services being developed to keep up with challenging e-commerce demands.
Logistics Management (LM):How has the parcel market evolved over the past 12 months?
David Ross: It’s one of the bright spots in the sluggish economy, as business-to-consumer sales continue to grow faster than the overall level of shipment volumes.
Doug Kahl:I think 2012 will go down as one of the biggest years of change in recent memory. Who would have pickedUPSas asuitor for TNT? And that deal is still not closed, and we sense increasing uncertainty at this moment that it will go through as planned. And don’t forget, this past fallFedExlaid out its profit improvement plan that calls for major transformation of the Express division.
In the meantime, theUnited States Postal Service (USPS)has less than a week of working capital on-hand; and, as hard as they are working at turning around their business, their hands are still tied by a lack of Congressional action.
Jerry Hempstead:I agree with David and Doug, and will quickly add that the parcel market is UPS and FedEx. They dominate the space, and the barrier to entry for another player is so high that there is little opportunity to logically make a case that one should invest to go take the duopoly on.
LM:How would you describe the current rate and pricing environment for parcel shippers?
Hempstead:For many years the presence of many players allowed shippers to play the bidding game and this moderated pricing. As a matter of fact, we had pricing declines in the marketplace for the most part from November 1979, when the air cargo business was deregulated, up until 2009 when DHL exited domestic service here in the U.S.
缺乏竞争对手现在已经改变了游戏的年代o that the two surviving firms of the express wars are racing to see who can raise prices the fastest. We have seen these increases take many forms, not simply in the base rates from which shippers get to take their discount, but in other methods and means such as rules changes, the addition of new accessorial charges, the addition of zips to the list of delivery area or extended area charges. Sadly with only two players with the full menu of air and ground services, the shippers are limited in their leverage. This situation will get worse for shippers as the economy improves.
Kahl:I hear the carriers use phrases such as “yield management,” “revenue management,” and quality of revenue in a very consistent manner. Analysts discuss how they see pricing as being rational with neither carrier looking to use price as a weapon against the other. All-in-all, there is a consistent, measured action being taken by pushing a rate increase or discount decrease button here or turning a surcharge dial there that raises overall parcel costs for shippers.
Ross:Jerry and Doug are both correct. Carrier pricing is rational, so there are no real “deals” out there. Furthermore, the pricing remains complex with surcharges and minimums to factor in. The shippers that can get the best data on their shipments and know what they’re shipping and how they’re being charged should fare the best at mitigating the increases.
LM:Where do you see rates going in 2013 and what’s driving them?
Kahl:We’ve already seen the 2013 parcel rate increase announcements and know that base rates and additional charges are going up again. Shippers with pricing agreements tied to the published base rates will see increases in the 6 percent to 8 percent range with many key surcharges increasing by at least that much if not more. For those shippers who may have an increase cap, they’ll likely still see some inflation of at least a couple points. No one is immune to the consistent, measured action mentioned earlier.
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