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U.S. Parcels
Market: Invasion
of the Last Mile
Mohammad Adra – USPS OIG
Thursday, November 3, 2016
Hirschburg, Kӧnigswinter, Germany
Confidential - USPS OIG
In the Beginning
• It used to be the duopoly and the Postal Service
• The duopoly had the dominant market share (82%) and the Postal Service had the rest
• The Postal Service focused on small lightweight parcels
• Fedex averaged $10 per piece, UPS averaged $9 per piece, and USPS averaged $3 per piece
Confidential - USPS OIG
But Now Comes Tremendous Ecommerce Growth
Source: Postal Service and U.S. Census Bureau.
Confidential - USPS OIG
Market Share
• USPS has greater market share in terms of domestic package volume.
• However, it has a smaller share of overall package revenue compared to UPS and FedEx.
Confidential - USPS OIG
Source: OIG analysis of annual reports of USPS, FedEx, and UPS.
• The Postal Service seems to be winning the “Amazon Battle”
• But is this a battle worth winning?
• Should the Big Three be more concerned about competing with Amazon?
And Amazon Is Getting in the Game
Confidential - USPS OIG Source: Logistics Management.
Jeff Bezos’ Napkin AKA Amazon’s Game Plan
Confidential - USPS OIG
Marketplace Dynamics Due to the Amazon Effect
Is Amazon a monopsony waiting to happen?
Is Amazon a customer, a competitor, or both?
Is delivery becoming a commodity?
Confidential - USPS OIG
New Entrants with New Business Models
Parcels
H3
(Hipsters,
Hustlers, and
Hackers)
Regional Carriers
Amazon USPS
Duopoly (FedEx
and UPS)
Confidential - USPS OIG
Regional Players
Confidential - USPS OIG
Hipsters Hackers Hustlers
Confidential - USPS OIG
The Hipsters, Hackers, and Hustlers
• Algorithm-based
• Asset-light
• Precarious workers – independent contractors
• Variabilization of cost structure
• Low barrier to entry
• Easy exit
• Niche applications and markets thus far
• Tremendously innovative and technology-rich
Confidential - USPS OIG
Unbundling Fedex?
Confidential - USPS OIG
2 Visions
The rising tide will lift all boats.
You must innovate or you will be overwhelmed
by the tide of others.
Confidential - USPS OIG
Where Do We See Disruption?
• New entrants
• New business models
• New technology
Confidential - USPS OIG
Technology
• IT infrastructure
– Coordinating algorithm
– Scanning data
• Drones
• Autonomous and Semi-Autonomous Vehicles
• Robotics
Confidential - USPS OIG
Confidential - USPS OIG
Up-and-Coming Technologies
Type of Technology How It Works Supervision
Needed Supervisors per
Piece
Autonomous aircrafts carry parcels (up to 15 kg) to their destination at relatively high speed.
Yes 1 supervisor for every
8 drones
Customers are notified of the exact arrival time. Upon arrival, customers pick up parcel from specified locker mounted on van or truck.
Yes 1 supervisor for every
8-10 AGVs
Small, autonomous vehicles deliver parcels to the doorstep using the sidewalk.
Yes 1 supervisor for every
50-100
Carrier can perform administrative tasks and intervene with the vehicle when necessary.
Yes 1 supervisor per
vehicle
Drones
Autonomous Ground Vehicles (AGVs) with
Lockers
Droids
Semiautonomous Ground Vehicles Confidential - USPS OIG
Technological Disruption and Innovation in Last Mile Delivery
Confidential - USPS OIG
Conclusion
• What I see is 2 trends: both triggered by technology
• Technology is empowering customers
• Technology is inviting new entrants with new business models
Confidential - USPS OIG
Fasten Your Seatbelt
Confidential - USPS OIG
