USPS introduces Parcel Select Regional Ground service

The United States Postal Service (USPS) announced this week it has introduced a new regional ground service for commercial shippers looking for an “economical solution for delivery of small packages.

Entitled, Parcel Select Regional Ground, USPS officials said this service offers competitive pricing for high-volume business-to-consumer shippers and provides an “attractive value proposition for delivery of small packages within short-range destinations…[and] provide big savings for qualified commercial shippers.”

In order to take advantage of Parcel Select Regional Ground, the USPS said that shippers must have a customer commitment agreement with the USPS and meet annual volume commitments of 10,000 mailpieces, with each piece weighing 5 pounds or less and measure 0.35 cubic foot or less, as well as be machineable and use an Intelligent Mail package barcode or Confirmation Services barcode.

“This new service is designed as a solution for e-commerce merchants looking to boost sales by offering free or discounted shipping charges for online purchases,” said Gary Reblin, USPS vice president, Domestic Products, in a statement. “It has tremendous appeal for commercial shippers requiring a cost-effective ground service for delivery of packages over shorter distances.”

An industry analyst told LM that this new offering is designed to compete with the fact that for transactions moving to the short-haul—zone 2, 3, or 4—FedEx and UPS now offer guaranteed two-day delivery via their normal ground products.

“The normal solution for the USPS would be priority mail which is not guaranteed and it marketed as a – to-3 day service,” said Jerry Hempstead, principal of Hempstead Consulting. “The focus still appears to be the small to medium sized shipper who has little or no discount with Fedex and UPS for their ground shipping.”

Illustrating an example, Hemsptead said if you take a traditional 5 pound shipment moving to a zone 3 and add the May 2011 fuel surcharge to the FedEx base tariff, the price is $7.68, whereas by using the new regional box offering from USPS, it would cost $6.88. He added that if a shipper has a 25% discount with a commercial carrier for ground then the shipper is going to be charged the minimum plus fuel of $6.09, which is significantly less than the USPS.

The benefits of the USPS product like its other flat rate products is its simplicity,” said Hempstead. “If it fits, it ships and you know exactly what the cost will be. Additionally the USPS is providing free packaging which is a savings to the shipper, the negative apart from the fact that it may be more expensive to a commercial shipper than a commercial carrier is that the service is not guaranteed. The USPS has had great success with the flat rate priority mail service and this is just a logical extension to attempt to compete with the commercial carriers for short haul shipments that don’t have to transit on an aircraft.”

Doug Kahl, Vice President of Strategic Initiatives, at TranzAct Technologies, said that historically the Parcel Select product has been for high volume shippers who can effectively drop into USPS destination facilities.

Parcel Select Regional Ground, he said, is designed to put smaller volume shippers into play. A 10,000 annual volume commitment works out to about 40 packages per day. The region footprint covers the local zone through zone 3, that should roughly cover up to 300 miles. And entry is based on origin, not destination facility.

“The next step for lower volume, regional shippers would be to contact their Postal Business Representative to confirm if there is a designated origin facility in their area,” said Kahl.

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