Dive Brief:
- The U.S. Postal Service must pursue heavier, more profitable shipments in order to better compete with FedEx and UPS, Postmaster General and CEO David Steiner said during a U.S. House of Representatives subcommittee hearing Tuesday.
- Steiner was asked how the Postal Service can stave off private competitors like FedEx and UPS to improve its financial outlook. While the agency's ongoing network overhaul is a step in the right direction, it also needs to win over more customers with higher-value shipments, according to Steiner.
- The Postal Service's average package weight is about one to 1.2 pounds, while FedEx and UPS volume averages closer to five pounds, according to Steiner. "Our network was designed for lower-weight packages. We need to move that up. We need to go after those higher-value packages."
Dive Insight:
Heavier packages mean pricier shipments and more profitable deliveries, but such a shift would require the Postal Service to shake up its current volume mix.
Although Steiner was light on specifics, the approach he outlined would mean chasing more after goods that can weigh several pounds rather than lighter-weight fare like T-shirts and paperback books. Rate hikes installed in January suggest the Postal Service has already been looking to attract heavier shipments, with lower price increases on Ground Advantage packages between eight and 20 pounds versus lighter items, per an analysis from LPF Spend Management founder Nate Skiver.
The Postal Service will still continue to pursue lower-value packages, Steiner said, but he noted that low-cost delivery providers using gig drivers are creating "a dramatic change in how that market is being served."
The agency is facing stiff competition for more profitable packages, as FedEx and UPS are prioritizing higher-value areas of the market. The USPS is also contending with a potential drop in the amount of Amazon volume it delivers. The e-commerce giant wants to reduce its USPS-bound volume by at least two-thirds by October, when its current contract with the Postal Service expires, per a report from the Wall Street Journal.
Steiner's remarks came during a hearing focused on the Postal Service's financial future. The Postmaster General warned that the agency is set to run out of cash in about a year. He said service reductions and price increases could be an option to address that, but added that the preferred choice would be for Congress to help usher in agency pension reform and up the Postal Service's borrowing limit.
