The estimates by ShipMatrix quantify the impact of steps being taken by Amazon.com.Inc. (NASDAQ:AMZN); UPS Inc. (NYSE:UPS) and FedEx Corp (NYSE:FDX) to divert last-mile parcels into their own networks, which are being vastly re-engineered in an effort to deliver last-mile parcels more cost-effectively than USPS can under its popular “Parcel Select” service, in which customers induct large parcel volumes deep in the USPS network for last-mile deliveries by letter carriers to residences and businesses. The objective of the three firms is to merge last-mile parcels with routes where their drivers are already making deliveries, thus building massive package density and driving down costs. The companies account for two-thirds of Parcel Select volume, according to ShipMatrix estimates.
USPS faces a problem on another front, according to ShipMatrix. FedEx and UPS have been aggressively targeting small to medium-sized shippers that are big users of USPS’ Priority Mail two- to three-day delivery service. USPS stands to lose about 10% of that volume due to diversion to rivals, according to ShipMatrix estimates. That would boost the total loss of parcel volume to 34% and revenue to 24%, it said. Priority Mail, which USPS handles from pick-up to delivery, generates four times the revenue per piece compared to Parcel Select. In its fiscal third quarter, the most recent, USPS generated about $2.38 in revenue on each piece tendered under Parcel Select.