New UPS Flat Rate Box

[rod]

Not believable.

Actually my wife compares me to those "Grumpy Old Men" guys.

[video=youtube;hh81LMz1sPo]http://www.youtube.com/watch?v=hh81LMz1sPo[/video]

 

[upssalesguy]

back on topic, anyone have anymore information about this being a general service offering? we could really start to gain back some market share with the small to medium size shippers.

I personally do not think that it needs to be the same rate as the USPS, it should be a few dollars more becasue we can get it there on time.

 

[brett636]

Just had a PCM on this today. What we were told is that its meant to compete with the USPS flat rate box, and ours is $11.99 to ship whatever fits in it up to 70 lbs. I was told we had one of the boxes in my center, but I could not find it to see how big it really is. Hopefully it brings in some volume!

 

[bbsam]

Just had a PCM on this today. What we were told is that its meant to compete with the USPS flat rate box, and ours is $11.99 to ship whatever fits in it up to 70 lbs. I was told we had one of the boxes in my center, but I could not find it to see how big it really is. Hopefully it brings in some volume!

Should bring in volume, but it's gonna cost!

 

[UpstateNYUPSer(Ret)]

The two test areas are Raleigh, NC, and Tuscon, AZ. This will also be an option on ups.com. We were told that if we pick up any of these that we have to give them to the PM clerk for special processing.

 

[clueless]

Does usps make money off flat rate boxes?

Apparently they do according to the last FY cost-revenue analysis. But it's the overall cost structure of the USPS business model that causes them to run in the red consistently. The compensation and benefits line is largely responsible for the financial situation--constituting the vast majority of operating costs (nearly 80%). Furthermore, in the most recent year, revenues decreased by over 9% while the compensation expense decreased less than 3%.

In any case, I think UPS should try the flat-rate option. The structure is already in place, I don't see much in the way of incremental costs or cannibalization since I would presume the increase in flat-rate package business would be at the cost of USPS not other UPS-related shipping methods.

 

[upssalesguy]

11.99 sucks. should have made is 9.99 - that would be a better price point.

the UPS Stores are going to be pissed....but I like the innovation, although it will take fedex about .02 seconds to match it

 

[Old Man Jingles]

11.99 sucks. should have made is 9.99 - that would be a better price point.

the UPS Stores are going to be pissed....but I like the innovation, although it will take fedex about .02 seconds to match it

Spoken like a true sales person.
The key decision point should be to maximize profit not sales.

 

[UpstateNYUPSer(Ret)]

My center manager told me a little more about this as he was doing a check in audit on my PC. There are two sizes to choose from with the smaller going for $11.99 for up to 70 lbs. He didn't know how much the bigger one was going to cost. He wasn't sure if it would catch on or not. We both joked that we hope that the ad firm that did the logistics video does not handle the marketing of this new product.

 

[brownmonster]

Actually my wife compares me to those "Grumpy Old Men" guys.



That's because you can't buy beer before noon on Sundays.

 

[TSup]

11.99 sucks. should have made is 9.99 - that would be a better price point.

the UPS Stores are going to be pissed....but I like the innovation, although it will take fedex about .02 seconds to match it

You are kidding right.....
$11.99 is a steal for any package with weight or distance
Not to mention everything comes inside the box (tracking label)

Example right now using internet
A 5 pound package from WI to CA is about $13
A 50 pound package from WI to CA is about $60

This service will do well in my opinion

 

[RustyPMcG]

This service will do well in my opinion

So how do you define "do well"?

I define it as a bigger bottom line.

Perhaps as a PC driver all you care about is volume. More packages, more cars on the road, more drivers with less seniority, more job security.

As an owner of a TUPSS, I'm concerned about this. I'm concerned that the price is so low that they won't give us our normal percentage of the shipping price. I'm concerned that even if they do, I'll be getting the same percentage of a smaller sale, and the increase in the number of sales won't make up for that. And I'm concerned that they'll market shipping on the Internet so heavily with this option that all I'll get is a drop-off allowance.

I'm concerned that UPS will be increasing package volume, and funding it by cutting into my profits instead of their own profits.

It might be a good idea. It might be a profitable idea for UPS. But I'm concerned that it's me and my peers that will be funding it in reduced gross sales, and reduced net profit.

 

[Catatonic]

So how do you define "do well"?

I define it as a bigger bottom line.

Perhaps as a PC driver all you care about is volume. More packages, more cars on the road, more drivers with less seniority, more job security.

As an owner of a TUPSS, I'm concerned about this. I'm concerned that the price is so low that they won't give us our normal percentage of the shipping price. I'm concerned that even if they do, I'll be getting the same percentage of a smaller sale, and the increase in the number of sales won't make up for that. And I'm concerned that they'll market shipping on the Internet so heavily with this option that all I'll get is a drop-off allowance.

I'm concerned that UPS will be increasing package volume, and funding it by cutting into my profits instead of their own profits.

It might be a good idea. It might be a profitable idea for UPS. But I'm concerned that it's me and my peers that will be funding it in reduced gross sales, and reduced net profit.

I assume you are concerned about cannibalization of existing packages ... just as UPS is.
What if these are packages you are not getting now but you will be getting them at a lower margin? Does that concern you? If so, is it because you feel you will have to hire additional people?
Just curious as to exactly why this would be bad for you.

 

[RustyPMcG]

Using round numbers, let's say I get 10 packages now, with a retail price of $20 each. I make $10 on each, for a total of $100.

Now the flat rate box comes along for $12, and I'm still going to get the same margin on them, so I'll get $6 each. Let's say 4 of the original 10 shippers decide to use the lower-priced flat rate box, so now make $10*6 + $6*4, or $84. I'm now coming up $16 short. I need at least 3 new customers to break even. That's a 30% increase in the number of packages.

That's assuming that I'll be able to handle 30% more packages without increasing my overhead, which includes employee wages. If I have to add additional help, I may need a 40% increase.

Do you really think that the flat rate box could bring in 30% more packages? Or even 20% more?

I'd put a more realistic figure at about 5%-8%. And at that rate, I can't afford to hire anyone new. My existing employees will just have to work harder, and customers will have to wait longer. Plus my already tight bottom line will be squeezed some more, and I may have to seriously consider becoming a vegetarian.

Now here's where it gets even worse: With a flat rate box there's no measuring and no weighing. That takes out another hurdle that keeps people from doing their own shipping online. That means not only will some of those full-price customers convert to flat rate boxes. They'll pay for them online, and all I'll get is $1 per package for their drop-offs.

So let's say we go from 10 full-price packages, to 6 full-price packages, and 5 flat rate boxes, 3 of which are drop-offs. That's $60+$12+$3. That's gross revenues of $75 instead of the $100 I was making before the flat rate boxes. UPS may now have 11 packages instead of 10, but I have 25% less gross revenue, and my profit margin (what's left after overhead) drops below zero. At that point I'd be better off shutting-down my shipping operations, and put all my effort into printing. I could then lay-off most of my staff, those folks with flat rate boxes can chase you guys down the street to take their boxes, and those 6 folks who were shipping at full price can go to the FedEx-Office store where the store manager doesn't depend on his particular store turning a profit in order to take home his company paycheck.

There's more to success than a small increase in package volume.

 

[upssalesguy]

You are kidding right.....
$11.99 is a steal for any package with weight or distance
Not to mention everything comes inside the box (tracking label)

Example right now using internet
A 5 pound package from WI to CA is about $13
A 50 pound package from WI to CA is about $60

This service will do well in my opinion

hmm $5.95 or $11.99 for the essentially same service.

Most shipper won't put more than 20 lbs in that box (it wont fit, so it wont ship).
under $10 is much more attractive to say they ship via UPS. $11.99 to me means people will continue to rate shop.

so yes, I am serious. $9.99 would be better. $11.99 to me is a price point UPS is comfortable with as to not dillute our other business, which is smart. I just dont think it is going to win volume from the USPS at that price. my opinion only.

 

[RustyPMcG]

Just so we know the USPS rates, here they are:

Priority Mail Flat Rate Envelope $4.90
Priority Mail Small Flat Rate Box $4.95 8-5/8" x 5-3/8" x 1-5/8"
Priority Mail Medium Flat Rate Box (FRB1) $10.70 11" x 8-1/2" x 5-1/2"
Priority Mail Medium Flat Rate Box (FRB2) $10.70 13-5/8" x 11-7/8" x 3-3/8"
Priority Mail Large Flat Rate Box (Domestic Addresses) $14.50 12" x 12" x 5-1/2"
Priority Mail Large Flat Rate Box (APO/FPO Destinations) $12.50 12" x 12" x 5-1/2"

Essentially the Priority Mail Medium (FRB2) is about the same size as a UPS small Express box. The Priority Mail Small box is barely bigger than a video tape, and is very, very thin.

Delivery Confirmation is 70-cents extra (19-cents if done online), and insruance is $1.75 for up to $50, $2.25 for up to $100, and more as you go up.

So a 12x12x5.5 box, the largest USPS Flat Rate box with Delivery Confirmation (the closest they come to tracking), and $100 of insurance (comperable to UPS's basic declared value coverage) is $17.45. (Note that the large USPS flat rate box does not meet minimum standards for a shipping box with any other carrier.) If they lose your box, you have to wait 30 days before they'll even entertain a claim, but if you didn't buy insurance, they're not going to pay a cent anyway.

My opinion is that UPS should be marketing the reasons why shipping UPS is first rate, and let the people who think flat rate is a better deal go to the Post Office. Does a 4-star restaurant open a drive-thru, and offer a dollar menu? No, they don't.

I'm all in favor of UPS offering Basic to their largest shippers to keep the volume, even if only part of it trickles down to the PC's. The buyers of Basic are buying based on logic. They're big companies with risk management departments, and cost anylists that are making sound business decisions. But USPS Flat Rate boxes are marketed to people who decide things less logically. They market those boxes by making emotional appeals to people who don't understand the risks compared to other options.

Instead of spending money on a feel-good "We <heart> Logistics" campaign, they could have designed an ad that turns the advantages of UPS shipping into emotional touchstones much like USPS turns "no weigh" into an emotional touchstone for their flat rate boxes. Show someone upset because they don't know where USPS has taken their flat rate box, and compare them to a better someone who knows where his UPS package is, and what day it'll be delivered on. Show someone finding out that they can't file a claim because they didn't pay extra for insurance at USPS, while someone tells them they would have been covered at UPS.

Show someone in Seattle who doesn't have to pay Boston prices to ship to Portland if they use UPS instead of USPS. Show someone being served quickly at a TUPSS, compared to someone waiting in line at the Post Office. Show someone getting their package on a second or third attempted delivery compared to trying to figure out how to get USPS to redeliver something.

There are so many ways to show the value of UPS. Letting USPS set the rules, and turn it into a price war will just result in casualties in the end.

 

[stevetheupsguy]

Using round numbers, let's say I get 10 packages now, with a retail price of $20 each. I make $10 on each, for a total of $100.

Now the flat rate box comes along for $12, and I'm still going to get the same margin on them, so I'll get $6 each. Let's say 4 of the original 10 shippers decide to use the lower-priced flat rate box, so now make $10*6 + $6*4, or $84. I'm now coming up $16 short. I need at least 3 new customers to break even. That's a 30% increase in the number of packages.

That's assuming that I'll be able to handle 30% more packages without increasing my overhead, which includes employee wages. If I have to add additional help, I may need a 40% increase.

Do you really think that the flat rate box could bring in 30% more packages? Or even 20% more?

I'd put a more realistic figure at about 5%-8%. And at that rate, I can't afford to hire anyone new. My existing employees will just have to work harder, and customers will have to wait longer. Plus my already tight bottom line will be squeezed some more, and I may have to seriously consider becoming a vegetarian.

Now here's where it gets even worse: With a flat rate box there's no measuring and no weighing. That takes out another hurdle that keeps people from doing their own shipping online. That means not only will some of those full-price customers convert to flat rate boxes. They'll pay for them online, and all I'll get is $1 per package for their drop-offs.

So let's say we go from 10 full-price packages, to 6 full-price packages, and 5 flat rate boxes, 3 of which are drop-offs. That's $60+$12+$3. That's gross revenues of $75 instead of the $100 I was making before the flat rate boxes. UPS may now have 11 packages instead of 10, but I have 25% less gross revenue, and my profit margin (what's left after overhead) drops below zero. At that point I'd be better off shutting-down my shipping operations, and put all my effort into printing. I could then lay-off most of my staff, those folks with flat rate boxes can chase you guys down the street to take their boxes, and those 6 folks who were shipping at full price can go to the FedEx-Office store where the store manager doesn't depend on his particular store turning a profit in order to take home his company paycheck.

There's more to success than a small increase in package volume.

Thanks for the easy math. I was finally able to understand someone's mathematical point. In these times we all must pull the belts a bit tighter, just sayin...Also, wouldn't the increase in online preocessed shipments (drop-offs) increase your profitability? I mean the shipped is doing all the work and just dropping off a box. It seems like you'll be raking in the money, even if it is a $1 a pop.

 

[RustyPMcG]

Also, wouldn't the increase in online preocessed shipments (drop-offs) increase your profitability? I mean the shipped is doing all the work and just dropping off a box. It seems like you'll be raking in the money, even if it is a $1 a pop.

A lot of store owners don't agree with me, but I love most drop-offs. I love Dish Network, RS and ARS packages, and the local businesses who form a steady stream late each afternoon bringing in packages that they didn't have ready in time for their regular pick-up.

The drop-offs I'm not thilled with are very much in the minority: eBay sellers using either the eBay or PayPal shipping utility, and other people who are shipping just a few packages online. Yes, it takes only a few seconds to scan the package, and put it in my pile compared to a couple minutes to ship a package for someone, but minute by minute, I'll make about three times as much if I get them to ship with me instead of just dropping-off -- and more if I can get them to declare a higher value, or get them to allow me to more properly package their hiddeous package.

The worst drop-offs are those who want ASDs or GSDs. They block space at the counter, elbowing-out paying customers, and very often want help filling out the form. Then when it's time to scan in the waybill, none of the information autofills, so it has to be entered by hand, and a typo in the shipper number can mean getting no credt for the drop-off after taking as much time with them as a paying customer would get. That's why about 70-80% of TUPSSs no longer carry any of the waybills. (That, and the number of times UPS charged-back fraudulent waybills to the store where the waybill came from.)

So overall, drop-offs are great frosting on the cake, but without the cake, the numbers don't add-up. If you found an area where there would be a high enough volume of drop-offs to make the gross revenue look inviting, you'd also find that the area is densely developed enough that rents will be higher, and it's still not profitable to be just a manned drop box.

There once was a time that a store could be nothing more than a "shipping store", and make money. All that other stuff that we do was just extra. Well, all those extras are now contributing more to the bottom line than ever before, and shipping is contributing less. If the trend continues, it won't be long until shipping is just a side-line. And that might not be the end of it. There's no way to make money as a manned dropbox. If that's all UPS wants, they need to buy-out the franchisees, and go to the FedEx model, and depend on company-owned stores that don't have to make a proft on their own as long as they are essential to profits made in other segments of the business.

 

[upssalesguy]

if you all could accept third party account numbers for billing, you wouldnt have to worry about ASD's and GSD's

 

[RustyPMcG]

if you all could accept third party account numbers for billing, you wouldnt have to worry about ASD's and GSD's

We could. But we would get stuck with any charges for unauthorized use of a shipper number. There is currently no way to check to see if it's a valid account, or if the person doing the shipping is authroized to use it.

If someone comes in with an ASD or GSD they got somewhere else, I don't care what account number they handwrite in it. The barcode on the label doesn't link back to me as being the source of the label. And, of course, prepaid labels are okay with me, too. (Although I did once notice someone used multiple copies of the same label on multiple packages, and I alerted my pick-up driver of that.)

And then there's also the issue of if I'm going to bill a 3rd party for shipping, I'm doing all the work of shipping, but only getting drop-off commission.

So they would need to, 1) Indemnify me in the case of unauthorized use of a shipper number, and 2) Pay me the work involved, not just drop-off rates.

That would be the same whether we're talking now, or about a flat rate box in the future.

I understand that as time moves on, the game changes. The role a TUPSS plays in the overall UPS strategy changes. But what doesn't change is the franchisees still have to be able to earn a living. If the game changes in a way that UPS is no longer providing sufficient revenue to the stores, the stores will go away. If UPS wants to keep a network of 4400+ stores, they can't force us to share the losses, and then deny us a chance to share in the profits.

If the game is going to change so UPS wants to compete head-on with USPS's second rate service, they should fund it out of corporate coffers, and not expect their franchisees to take the hit. That would be like saying to the PC drivers, "Well, we're getting you 5% more work, but we need you to take a 25% pay-cut so we can afford the costs associated with that 5% increase."