The explosive growth of e-commerce has led to a corresponding growth in the importance of package delivery. Recognizing how important this trend is to the U.S. Postal Service, the U.S. Postal Service Office of Inspector General (OIG) has begun to examine the parcel market, issuing a number of reports assessing trends in the shipping industry and the Postal Service’s state of readiness for growth in this market.
As part of this series of work, the OIG held a forum earlier this year in front of a broad audience about trends in the package services industry and how the Postal Service can best fulfill customer needs as it pursues success in this line of business. The discussion included three noted panelists from the package delivery industry and highlighted a number of themes about package services and approaches the Postal Service could consider as package services grow in importance.
This issue brief outlines the discussion, adds marketplace context, and expands on eight major themes that emerged:
- The growth of e-commerce is driving dramatic growth in the package shipping industry, and the Postal Service has an opportunity both to meet the evolving needs of its customers and to garner significant new revenue.
- Package shipping is a very difficult, but critical, business. Low margins, demanding consumers, and growing costs create significant challenges for providers.
- The package shipping industry is very competitive and contains not only the Postal Service and established private delivery companies such as UPS and FedEx, but also expanding e-commerce providers, and a slew of tech-savvy newcomers all competing for a share of this rapidly growing business.
- Participants in the package industry are often each other’s customers as well as competitors. They rely on each other’s services to supplement their own.
- Consumer demand for shipping services is evolving quickly and there is a notable shift in power from providers to customers and recipients.
- Commoditization will be a constant challenge in the package delivery market as competition increases for last-mile services. The Postal Service and other package shipping companies will need to differentiate their services and demonstrate their value.
- The Postal Service’s biggest advantage is its nationwide, last-mile delivery network. Its capability to inexpensively handle large numbers of small packages makes it a key part of the industry, one that its customers and competitors alike have grown to rely on.
- Meeting the explosive growth, evolving operational challenges, and customer demands in the parcel delivery market will require continual innovation from the Postal Service and other participants in the industry.