Postal Service, UPS Team Up to Make Online Returns Easier
By Daniel P. Bearth, Staff Writer
This story appears in the Feb. 16 print edition of Transport Topics.
UPS Inc. and the U.S. Postal Service have agreed to work together to make it easier for consumers to return goods purchased online, a move that more closely aligns the nation’s mail delivery system with the largest commercial package carrier.
Under a pilot program starting this month, consumers will be able to return packages to any post office or collection box, or request a pick-up from a letter carrier. UPS will continue to accept returns as well.
“Allowing consumers to use the U.S. Postal Service’s more than 160 million access points — including their own homes — creates an unparalleled returns service,” said John Sutthoff, vice president of global marketing and supply chain strategy for UPS. “We think we can change the game for consumer-to-business returns.”
Sutthoff said the test is expected to last about five months and will involve as many as five online retailers, including Buy Seasons Inc., a supplier of seasonal décor and party supplies, and apparel maker L.L. Bean.
Total online spending dropped 3% during the holiday shopping season in 2008 and a weakening economy has forced many online merchants to find new ways to shore up sales and reduce costs, Sutthoff said.
A survey conducted for UPS by Forrester Consulting last year found that many consumers who buy goods online object to the cost and hassle of returning goods and that companies with more generous return policies are able to grow sales faster and generate more customer loyalty.
By making it more convenient to return goods and subsidizing the cost, online merchants also can reduce the number of inquiries from consumers about the status of returns, thus reducing the cost of service, said Sucharita Mulpuru, a principal with Forrester who conducted the survey.
UPS said it will pick up returned packages from postal facilities
and provide tracking information through its existing delivery network. Jim Cochrane, vice president of ground shipping for the U.S. Postal Service, said the arrangement with UPS will provide consumers with the “best of both companies” and is a “creative solution” to the problem of handling returns.
“We see nothing but good things coming out of this,” he said.
Postal officials estimate that about 400 million packages are returned each year and that UPS currently handles about two-thirds of the business.
Cochrane said the postal service would welcome a similar arrangement with rival FedEx Corp. FedEx has drop boxes located at most post offices and offers a service called SmartPost in which packages are delivered to homes by the Postal Service. FedEx also provides air lift for U.S. mail.
Bill Razzouk, chief executive officer of Newgistics Inc., a logistics company that already uses the Postal Service to handle returns, said he applauds the effort to expand the program with UPS.
“Newgistics has led the effort in developing this program and views UPS’ entry into the market as validation of our investment and success of this program,” he said.
Parcel industry consultant Satish Jindel said the program is good for the Postal Service because it will increase package volume and good for UPS because it will cost less to handle some returned packages, but he questioned the idea that the program would lead to more online sales.
“People do not buy more because it is easier to return,” he said.
Although package services represent only a small slice of revenue for the U.S. Postal Service — it brought in $1.8 billion, or about 3% of total revenue in fiscal year 2008 — Cochrane said the service is putting more emphasis on package delivery services as a way to “diversify” the revenue stream.
The Postal Service lost $2.8 billion in the fiscal year ended Sept. 30 and posted a net loss of $384 million in the three months ended Dec. 31 as the current economic downturn cuts into mail volume.
Postmaster General John Potter, in a report to the Board of Governors on Feb. 4, said the postal service is taking “bold” steps to cut costs.
Among the steps being taken are: A reduction in work hours, a salary freeze and a halt to all new postal facilities; consolidation of excess capacity in mail processing and transportation networks; and the introduction of new products and price and volume discounts to consumers and businesses.
