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DOMESTIC PRODUCTS DOMESTIC PRODUCTS 1 USPS Shipping Services Meeting Business Needs in 2011 and Beyond Bill Vanderveer Commercial Shipping Specialist Greater Michigan District

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DOMESTIC PRODUCTSDOMESTIC PRODUCTS 11

USPS Shipping Services

Meeting Business Needs in 2011 and Beyond

Bill VanderveerCommercial Shipping Specialist

Greater Michigan District

DOMESTIC PRODUCTSDOMESTIC PRODUCTS 22

Overview1) The business

environment in 2011

2) USPS products and pricing to improve business efficiency & reduce costs

3) More ways USPS adds value

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Domestic Products

The business environment in 2011

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• Manufacturing growth, capital expenditures to increase by 14.5%14.5% in 2011―Institute for Supply Management semi-annual forecast

• Fulfillment growth:12% increase inonline shipping 2010holiday season comparedwith 2009

Growth prospects in 2011

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But . . .

• Weather Events in much of U.S

• Rising fuel costs

• Businesses and consumers quicklyusing up any financial ‘cushion’

• No one can afford to ‘blow’their shipping budget

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• Strengthening the business to consumer channel

• Improving the customer experience

• Competing for package business

• Becoming a leaner, faster, smarter organization

Postal Service core business strategy

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U.S. Postal Service Commercial Resources

DOMESTIC PRODUCTSDOMESTIC PRODUCTS

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USPS Shipping Products

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• Free shipping has become a major decision factor for e-commerce consumers.

• ComScore reported that 73% of shippers consider free shipping “somewhat important” or “very important” when making online or catalog purchases.

73%

Source: comScore, Inc.

eCommerce trends

DOMESTIC PRODUCTSDOMESTIC PRODUCTS

U.S. Domestic Shipping VolumeBy Length of Haul

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Colography 2011

58% of shipping volume in Zone 1-3(≤ 300 miles)

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Fuzzy Math--What is a Net Minimum?Fuzzy Math--What is a Net Minimum?

Published Daily Rate 5 pound Ground to Zone 5 $7.00

Your Contract Discount [e.g. 50%] -$3.50

Rate is higher of two, either Net Minimum or discounted rate $5.17

$1.67 of discount (24%) eliminated by Net Minimum

Actual Discount is about half [e.g.26.1%]

Add Accessorial fees and surcharges fuel @ 8.5% $0.44

Residential DAS $2.75

Total cost to ship $8.36

Same package upgraded to Priority Mail Regional ASame package upgraded to Priority Mail Regional A $5.19 $5.19

Savings for this example $3.17Savings for this example $3.17

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Gaining new ground options• Leverage existing network

• Appeal to regional shippers

• Utilize sort capacity

– Incent entry points deeper in network

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• Small, dense parcels with max. weight of 15 or 20 lbs

• Delivery in 2 days to most of the lower 48 states

• Regional rate provides up to a 70% discount70% discount from retail rates

• No minimumannual volumerequirement

• Commercial Only

• Returns too

Priority Mail Regional Rate Boxes™Speed, price and convenience with Tracking

Box Type “A” (15 lb max.)Cubic Size .21

(Inside)

“B” (20 lb max.)Cubic Size .41

(Inside)

Side Loading Box 13 1/16 X 11 1/16 X 2 ½ inches

16¼ x 14 ½ x 3 inches

Top Loading Box 10 ⅛ X 7 ⅛ X 5 ½ inches

12 ¼ X 10 ½ X 5 ½ inches

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New in April 2011

Parcel Select™ Regional Ground

• Economical ground option for lightweight parcels• Low price makes it possible for business to offer “free shipping” to their customers• For commercial shippers only; annual volume threshold 10,000 pieces• Parcels: 1-5 lbs with a cube restriction 0.35 cubic ft• Authorized drop points throughout our network• Tracking included

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Zone 1-2 Zone 3

Parcel Select Regional Ground Up to 2 lbs

Entry LevelONCD OSCF

$ 3.78 $ 4.03

Entry LevelONCD OSCF

$ 3.78 $ 4.03

Up to 3 lbs 4.60 4.85 4.60 4.85

Up to 4 lbs 4.93 5.18 4.93 5.18

Up to 5 lbs 5.18 5.43 5.18 5.43

Priority Mail Regional Rate Box Box A (up to 15 lbs)

Commercial CommercialBase Plus

$ 4.97 $ 4.97

Commercial CommercialBase Plus $ 5.08 $ 5.08

Box B (up to 20 lbs) $ 5.81 $ 5.81 6.88 6.88

Price comparison within zone 3

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First-Class Mail ParcelsNew in April 2011

• Retail, Commercial Base (includes Presort) and Commercial Plus pricing

• Commercial Base single-piece pricing offers advantage over retail on parcels up to 13 oz.

• For qualifying customers, Commercial Plus pricing is highly competitive on parcels weighing between13–16 ounces, with service standard of 1-3 days within contiguous U.S.• Gap between First-Class and Standard parcel narrows

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• Last-mile delivery

• Solid partnerships &expanding relationships

• Efficient, reliable B2Cshipping

• Hold For Pickup available

• Standard Mail® Parcels reclassified as “competitive” and will become a category within Parcel Select in Jan 2012.

• UPS Ground “Basic”, DHL “Global Mail”, FedEx “Smartpost”

Parcel Select®

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Pushing the envelope• New products help you do business• Document shipping― $15 billion/yr• Cost cutting Flat Rate options, 2-day delivery• Also useful for B2C product fulfillment

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Priority Mail Flat Rate Envelopes

• Six uniformly priced Flat Rate Envelopes meeting multiple shipping needs

($4.75 & $4.95)

Regular 12½ X 9½ inchesLegal 15 X 9½ inchesPadded 12½ X 9½ inchesGift Card 10 X 7 inchesSmall 10 X 6 inchesWindow 10 X 5 inches

• Documents, flats and lightweight shipping

• Commercial Base, Plus, and contract pricing available. Priority Mail Padded Flat Rate Envelope for

small merchandise (apparel, jewelry, electronics)

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• Two Flat Rate Envelopes(legal and regular) sell forsame low price ($17.40 flat rate & $12.96 metro)

• Lowered volume thresholdfor Commercial PlusPricing (5,000 pcs/year)

• Guaranteed Overnight reach

• Economical 2nd-daydelivery options

• Sunday & Holiday options

Express Mail envelopes

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Critical Mail™

Large envelope 9 X 12 in, flat contents up to 13 oz.Small envelope 5¾ X 9 in, flat contents up to 3 oz.

• High visibility; design drives “open first” behavior

• Delivery 1 to 3 days

• 5,000 pieces/yr to qualify• Machineable letters and flats

• Intelligent Mail™barcodes provide free tracking• Accountable mail

For documents, tickets, &urgent materials

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Critical Mail*Critical Mail* vs. Certified MailCertified Mail

• Total CostTotal Cost Letter (3oz Max) $3.50

Flat $4.25 (13 oz max)

Tracking—complete audit trail from entry, through processing, and delivery event

Envelope—supplied by US Postal Service

Prepared and processed in Automation Environment

• Certified Fee = Postage + $2.85

• Postage 3 oz Ltr $0.84 3oz Flat $1.28

• Electronic Receipt $1.15• Total CostTotal Cost Letter (3 oz) $4.84

Flat (3 oz) $5.28 (13oz $7.28)

• Tracking—at delivery end only• Envelope—supplied by

customer• Visible at delivery end only

*5,000 annual volume and agreement required

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• Prepaid Forever Priority Mail Flat Rate Packaging• Priority Mail Large Flat Rate Game Board Box

• Pay-As-You-Go Flat Rate Boxes**

• Express Mail Flat Rate Box**

**under PRC consideration

USPS Flat Rate story continues…

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• Can be 2-3 times the cost of processing outbound shipment

• Poorly handled returns can erode 30-35% of profits

• Effective returns strategies are critical & should include: – Customer convenience

– Easy Drop off– Prepaid Barcoded Label

– Credit issued promptly – Visibility

• USPS solutions provide a fit

Smart Returns

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• First-mile service leverages unique delivery & retail advantages of USPS – 21 Network Distribution Centers – 20,000+ Post Offices•Postal Service picks up at point of origin; business partner hands off near origin• Consumer receives the best of both worlds (i.e., USPS moves shipment to pickup point of their choice).

Merchandise Return Service (MRS)• Premier end-to-end service, customized to fit your business needs• Ability to put a barcode on every piece• First-Class MRS a low-cost option • Available with Priority Mail Regional Rate; Cubic & Commercial Plus Pricing; First-Class Mail Parcels; Parcel Post

Parcel Return Service (PRS)

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New Pricing

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2011 Price Changes

• January 2011: USPS overall average price increase of 3.6% for all shipping categories

• Increases lowest (or nonexistent) for commercial customers

• Market-based and calculated to drive volume sales & encourage growth in small parcel B2C shipping

AVERAGE OVERALL

Commercial

PlusRETAIL

Priority Mail 3.5% 2.0 3.9%

Express Mail 4.6% (-5%) 5%

Parcel Select 4.4% n/a n/a

Parcel Return 3.1% n/a n/a

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• USPS applies dim weight only to Priority Mail packages > 1 cubic foot traveling by air to Zones 5-8.

• The divider for 2011 remains 194 for domestic shipping.

• USPS approach is to use Priority Mail Cubic Pricing to incent better dims.

• No Dimensional Weights for Express Mail Domestic or any International

Dimensional (DIM) Weight

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=

Priority Mail Cubic PricingSaving money by

saving space

• USPS is a pioneer in space-efficient shipping

• To qualify: Commercial Plus Pricing customer > 250,000 pieces in previous calendar year

Customer Commitment Agreement

• Price is based on cube and zone--not weight (up to 20 lbs).

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More ways USPS adds value

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• 36,000 retail locations• 2,500 Automated Postal Centers (252,000 daily transactions)• Nearly 1 million delivery points added to the delivery

network each year (3,048/day)

Access and convenience

USPS.com• 3rd most trusted site in privacy (Ponemon Institute, 2009)• 1.1 million visits each day

Top USPS.com functions in 20091. ZIP Code lookup2. Track & Confirm™3. Calculate Postage4. PO Locator5. Change of Address

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More scans:• Four scans ≥ 95% of time

• Every Express and Priority Mail item tracked with an average 7 scan events:

AcceptanceOutgoing SortationIncoming SortationArrival at UnitProcessing CompleteOut for DeliveryDelivered

More ways to track:• Track and Confirm™ @ usps.com

• Mobile phone applications• 3rd Party dynamic online tracking

Visibility & Tracking

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• 2 Days to most of the continental USA from origin 488 Lansing

•USPS-supplied packaging

• Convenient, free pickup options

• Multiple tracking scans with electronic Delivery Confirmation (electronic or manifest mailing)

• Free forwarding and returns

• No surcharges

• Domestic rates to Alaska, Hawaii, Puerto Rico, Guam, U.S. Virgin Islands and most APO/FPO/DPO destinations.

The expedited advantage

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• We own the mailbox (more deliveries on first try)

• 36,000 local Post Offices for pick up of undelivered pieces

• More locations than any other carrier—including APO and P.O. Boxes

• Security backed by the U.S. Postal Inspection Service

• Improved tracking

• Pricing to fit all needs

• Sustainability standards--eco friendly

More reasons to ship USPS

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