ups fedex
© Jerome Cid

UPS has intensified its play for intra-US parcel traffic with a new offering that offers shippers a flat rate for parcels up to 50lbs (31.75kg) in weight. 

Coming just before the peak season, this product competes head-on with the US Postal Service (USPS) and rival FedEx, which has fielded a flat-rate parcel product for some time. 

UPS Simple Rate is available in multiple speeds, ranging from the integrator’s 2nd Day Air to its standard Ground service. 

It targets small and mid-sized US shippers and has little appeal to large companies, as these usually have more advantageous discounts on their contract rates, noted Melissa Runge, vice-president analytical solutions of Spend Management Experts, a Georgia-based consultancy on logistics costs.  

“Simple Rate helps small businesses take the guesswork out of shipping by providing simple, fast and transparent flat rates nationwide, with guaranteed on-time delivery,” claimed UPS chief marketing officer Kevin Warren. 

But UPS is playing catch-up with the new product. FedEx has been offering a similar service, FedEx OneRate, for about six years. 

“When FedEx introduced OneRate e-commerce was nowhere near where the volumes are today,” said Ms Runge. “UPS realised it couldn’t compete without that product today.” 

UPS has designed the key features of its new product to differentiate it from the FedEx flat-rate programme. While UPS customers can choose from various options covering priority and slower modes, the FedEx OneRate service is squarely in the express sector with one- to three-day transit times. The company does not offer it through its ground service. 

A more pronounced – and likely more decisive – difference between the competing integrator products is the price structure. UPS has opted for flat rates for all lower 48 US states; only rates involving Alaska or Hawaii are different. FedEx has a staggered pricing regime based on three geographical tiers. Observers have criticised this as adding unnecessary complexity to what is supposed to be a straightforward pricing mechanism. 

Ms Runge thinks the narrower menu and different weight limits put FedEx at a disadvantage, “but what really hurts it is the one simple rate. FedEx’s zonal pricing structure is not competitive,” she added.  

She thinks FedEx will probably change its pricing model going forward: “A flat rate with zonal structure makes no sense,” she said. 

FedEx appears to be already working on changes to OneRate. According to unconfirmed reports, it is preparing to loosen the packaging requirements to allow shippers to use their own packaging. So far they have to use the FedEx packaging and logo and shippers chafe at this restriction.  

UPS customers can order UPS Simple Rate-branded boxes, but they are free to use their own packaging, a point that the integrator stressed in its announcement of the new service.

The new product also puts pressure on USPS, although some observers doubt that UPS will be able to match the low rates the postal agency charges for its flat-rate parcel services.

Still, the USPS finds itself confronted with a more aggressive stance from the integrators. FedEx is working to shift most of its SmartPost traffic delivered on the final mile by USPS into its own network to boost utilisation.  

And the agency has no immediate way to fight back, Ms Runge noted. It submitted its proposed pricing for 2020 in early October to the Postal Regulatory Commission for approval. These changes will raise the domestic charge for small flat-rate boxes from $7.90 to $8.30 in January, while medium flat-rate boxes will cost $15.05 instead of $14.35.  

Going forward, USPS could decide to award the linehaul contract for its air mail product to another carrier. That would really hurt FedEx. 

This article has been corrected. It originally stated that UPS Simple Rate accepts parcels up to 70lbs. The correct number is 50lbs.

COMMENTS 1


Leave a Reply

  • Spicoli

    November 15, 2019 at 4:50 am

    After all the “miscarriages” I’ve had with UPS, I wouldn’t care if they shipped for free. I had a big dollar item get shipped to the WRONG address (even though my correct address was on the shipping slip) so it didn’t get shipped the day it was supposed to. I called customer service and was told they dropped the package off at the wrong address and was told to “just order another one cuz this package was irretrievable. When I notified them I couldn’t cuz it was a private sale they were like oh, you’ll have to call back tomorrow in hopes that the place they dropped this package off would be nice enough to send it back (which they did. When I did call the following day, I was told it would be delivered by days end. While I was waiting, the driver pulled up in front of my house, went to the back of his truck. After about 5 minutes, he came out and asked “can I come back”? I told him that I was expecting this item yesterday. He went to the back of his truck and emerged a few minutes later and said “I have to clean out my truck”. He drove to the side of the street and parked. I got dressed went outside to greet him and he all of a sudden drive off. I checked the tracking after 8pm and it said “an attempt was made to deliver this package”! Needless to say I was livid cuz the driver NEVER came back to my house. In essence, he bas drove right by my house. This “attempt” without actually stopping is their modus operandi as this was the 3rd or 4th time this type of “attempt” has been made. I thought UPS ran a tight ship but give me FEDEX or USPS any day. From now on, I’ll never make a purchase from any merchant who uses UPS ! I apologize to those businesses that may have no other choices but I’ve suffered for the last time with UPS. I would give UPS two BIG THUMBS DOWN !!!

    Reply