Tuesday, December 15, 2015

USPS Is Gaining on FedEx and UPS in E-commerce Shipping



UPS chart shows commercial Priority Mail growth after rate cut.


The U.S. Postal Service is using low rates to muscle aside its private competitors and grab nearly all the growth in e-commerce-related shipments, according to a UPS analysis.

A round of steep, unfair price cuts in September 2014 has enabled the USPS to grab market share from UPS and FedEx, UPS charged in a recent filing with the Postal Regulatory Commission.

“The Postal Service reduced rates as much as 58% for packages shipping to zones 1-5 and weighing between six and twenty pounds, the rate cells most popular for the burgeoning e-commerce market. These deep discounts brought Priority Mail rates for the largest customers substantially below rates set by private competitors in the market.”

“Before the price cuts, the Postal Service’s market growth rate had stalled, barely registering above 0%, while UPS and FedEx were exhibiting healthy growth rates. After the Postal Service’s price cuts, the growth of UPS and FedEx Ground slowed, and the Postal Service’s commercial growth rates quickly became 10 to 20 times that of its private competitors.”

USPS’s price increases for Priority Mail next month won’t solve the problem, UPS says: “Despite an announced average increase of 9.4% for Commercial Base prices in 2016, for example, discounts ranging from 7% to 53% below pre-September 2014 rates remain for packages weighing between six and twenty pounds.”

“The Postal Service’s ability to set artificially low rates,” says UPS, also shows up in the Parcel Select rates the USPS charges the likes of Amazon, UPS, and FedEx for “last-mile delivery.”

“The Postal Service is leveraging its network to such a degree that UPS and other carriers use Parcel Select to compete because they are not able to deliver at or below the prices the Postal Service charges for this service,” UPS wrote. “Over the last year, Parcel Select experienced 26.5% volume growth, compared to 2.8% and 2.1% growth for UPS Ground and FedEx Ground, respectively.”

UPS claims that the Postal Service’s commercial parcel rates are priced too low to cover its costs, which means USPS’s e-commerce growth is being built “on the backs” of traditional mail customers: “The Postal Service is charging higher prices to captive mailers, while reducing service standards, in order to help fund its aggressive expansion into competitive product markets.”

The Postal Service counters that its methods are fair, legal, and backed by research, while UPS’s proposal is “based upon a set of ad hoc, loosely-constructed, cost measures.”

eCommerce Bytes recently provided an in-depth look at the UPS-USPS debate and what it could mean for parcel shippers.

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Monday, November 23, 2015

Few Postal Jobs Will Be Cut in 2016

Don't look for any major downsizing from the U.S. Postal Service during the coming year: A new report indicates the postal workforce will remain stable through late 2016.

The agency is projecting a 0.6% decrease in work hours during Fiscal Year 2016, according to an annual financial plan it released Friday. That suggests this will be the third consecutive year of virtually no change in the size of the workforce, after a three-year period (2010-2013) in which the service shed one-sixth of its career employees. Work hours and the number of employees actually inched up during FY2015.

The financial report says that Phase II of Network Rationalization (the politically sensitive closing of mail-processing centers) and a 2.1% decrease in mail volume will make the slight cuts in workhours possible.

“These savings are forecasted to be partially offset by increases in training hours, growth initiatives and the impact of an additional delivery day for Leap Year,” the report says.

A change of plans
The Postal Service released a five-year plan in April 2013 that called for cutting 92,000 career employees by September 2017, then almost immediately put the brakes on more than a decade of downsizing: Since that report was released, the career workforce has hardly budged, ending FY 2015 at 492,000.

That 2013 plan projected many of the cuts would come from curtailing Saturday deliveries, but that proposal has apparently been abandoned. Five-day delivery isn’t even mentioned in the FY2016 financial plan.

“The continued growth in the number of packages -- which are much more labor-intensive than letters – and the ever-growing number of delivery points, make it increasingly difficult to capture work hour savings,” says the FY2016 plan. “We will continue to innovate to drive efficiency.”

Assuming that the 4.3% exigent surcharge on most postal rates will be eliminated early next year, the plan projects a revenue increase of only $400 million, to $69.3 billion. With an estimated $1.5 billion in additional expenses, that would mean an operating loss of $100 million. (Politicians and the news media will call it a $5.9 billion loss because they will include the supposed prepayment of retiree health benefits that postal officials wisely refuse to pay).

Other articles on the Postal Service workforce include:


Monday, November 16, 2015

Verso Warns of Restructuring, Asset Sell-Offs

Verso Corporation, the largest U.S.-based maker of magazine-quality paper, told customers this morning that "cash flow and liquidity concerns" might force it to restructure or to sell some mills.

The announcement is no surprise to Wall Street, where Verso's bonds have been trading at pennies on the dollar in anticipation of a Chapter 11 bankruptcy reorganization or other drastic measures.

Here's the text of the message emailed to Verso customers this morning by Michael A. Weinhold, Verso's Senior Vice President of Sales, Marketing & Product Development:

Dear Valued Customer, 

Verso is currently facing a confluence of external factors that negatively affect our liquidity and cash flows, including impending financial obligations, an accelerated and unprecedented decline in demand for our coated paper products, and a significant increase in foreign imports resulting from a strong U.S. dollar relative to foreign currencies.

As a result of our cash flow and liquidity concerns, we have begun evaluating potential restructuring alternatives. Verso has engaged PJT Partners L.P. to provide us with restructuring and transactional services, and O'Melveny & Myers LLP to provide us with restructuring legal advice and assistance. We have also begun discussions with certain of our creditors to explore potential restructuring alternatives.

We also are exploring opportunities to raise funds through potential sales of some of our mills and related facilities, which may include our Stevens Point, Androscoggin and Duluth mills, our recently idled Wickliffe Mill, and the hydroelectric generation facilities associated with our Androscoggin Mill.

During this evaluation process, customers can expect to receive the same high-quality products and services that originally led them to select Verso as a supplier. There should be no changes or delays in the ordering process or deliveries, and customers should continue to work with their current sales representatives. We remain steadfastly committed to running our mills safely and efficiently, reducing costs and delivering the exceptional customer experience that Verso is known for.

As always, our aim is to ensure that all customer needs are seamlessly met. Please do not hesitate to call me if you have questions or concerns.

Thank you for your continued support of Verso. 

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Wednesday, October 28, 2015

What Is a Dead Tree Edition? 7 Ways the Meaning Has Evolved

To celebrate the seventh birthday of the “Dead Tree Edition” blog this month, here’s a look back at how the meaning of the phrase “dead tree edition” has changed since October 2008.

The "experts" concluded that the Web
had blasted a fatal hole in print.
Since the early days of the Internet, “dead tree edition” has been slang for a printed publication, but the phrase no longer carries the baggage it used to. Linguists would say that the phrase’s denotation is little changed but that the connotations are vastly different.

In 2003, William R. Tracey wrote succinctly that the phrase was “derogatory cyberspeak for the paper version of a periodical that appears in both paper and electronic (Internet) forms.” “Dead” highlighted what the digerati thought printed periodicals soon would be, and “tree” underscored the supposed environmental horrors of turning a renewable resource into a product.

The meaning was largely unchanged five years later when this blog was launched, at a time when a digital-only publication promoting print media was still an ironic oddity. The name was meant as a badge of honor: “Yeah, I’m a print geek; you gotta problem with that?” But some folks in the traditional publishing and printing industries were not amused. (See “Can You Trust an Anonymous Blog with an Aggravating Name?")

Not dead yet:The wound wasn't fatal. New
shoots and leaves demonstrate print's vitality.
Here are seven ways the phrase’s meaning has changed since October of 2008:

1) Books: The most obvious change is that “dead tree edition” now includes books, not just periodicals. E-books had been around in some form for years. But they didn’t start making a splash – and spurring the inevitable predictions that they would soon put Gutenberg out of business -- until the Kindle 2 was introduced in 2009.

2) Digital publications: Back in 2008, many of us ink-on-paper types worried that digital editions would soon replace printed ones. It’s not happening. Printed daily newspapers are withering away, but not because people are switching to digital newspapers. Digital magazines (as opposed to the web sites of magazines) have mostly been an overhyped bust, especially now that smartphones have largely usurped tablets. E-book sales grew exponentially for a few years, then plateaued at somewhere around 20% to 30% of the book market.

3) Human nature: Publishers used to assume that once people “went digital,” they would never go back to print. Human behavior turned out not to be so black and white. People who wouldn’t think of getting their news from a newspaper rather than their phone see nothing incongruous about leaning back with a fashion or hobbyist magazine. Consumers who load up their Kindles with novels and biographies still seem to turn to print for other genres of books. A few folks are print or digital diehards; everyone else expects digital when they want digital and print when they want print.

4) Greenwash: Consumers are far more aware these days that electronic devices host a plethora of hazardous materials and that the “coal-fired Internet” consumes massive amounts of power. Many a company has dropped its “go green, go paperless” promotions of digital alternatives, knowing that its dubious claims won’t stand up to an in-depth environmental assessment or challenges from the likes of Two Sides. And perhaps more people now realize that paper manufacturing more often discourages deforestation than causing it.

5) “Dead tree” magazines forgot to die: In 2008, magazines were widely predicted to be headed down the same toilet that was (and still is) swallowing the newspaper business. But a funny thing happened on the way to oblivion: Magazine publishers transformed into “magazine media” companies, sporting leaner and more niche-oriented print brands that acted as launching pads for successful digital ventures. Gone are the glory days of huge newsstand sales and bloated, advertising-subsidized circulation. Yet magazines have found their place in the multimedia publishing world as premium products that deliver steady profits.

6) The digital-media business is no picnic: Digital products were supposed to liberate publishers from the old evils of paper prices, postal rates, and "expect 6 to 8 weeks for delivery." But instead of a new utopia, we've wandered into a strange land full of its own ills -- low ad rates, banner blindness, ad blockers, and a continuing scramble to keep current with technology. And don't forget such lurking monsters as Google, Facebook, and Apple that can bankrupt publishers with a single change of algorithm or policy. Compared to pop-ups, interstitials, and other effluents that are desperately trying to monetize page views, the good old right-hand ad page facing a left-hand editorial page looks like pretty nifty technology.

7) Digital needs print: Publishing people used to have silly debates about print (“It’s dead”) versus digital (“turning dollars into dimes”), but find that such either/or thinking doesn’t fit the real world. Web sites that are associated with a respected print publication have a huge competitive advantage over those that don’t, especially in fields where credibility and search engines are crucial. Many publishers find that the economics of long-form journalism (what we used to call “articles”) don’t work on the web unless there’s a print publication that helps cover the costs.

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