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By Joel Nelson on Apr 5, 2024 in News
How are government and private carrier services adapting as online communication and purchasing practices continue to supplant traditional paper mail?
According to McKinsey, the global volume ratio of letters to parcels declined from 13:1 in 2005 to 4:1 in 2015 and is expected to reach 1:1 parity by 2025. Total U.S. parcel volume declined 2% in 2022 due to a reduced volume of traditional mail, marketing materials and periodicals. At the same time, the share of U.S. retail sales made online doubled in just a decade, creating greater demand for package delivery services.
But revenue generated from shipping packages has increased recently, with carriers earning $198 billion in 2022, a 6.5% increase over the previous year. United Parcel Service led with $73 billion, followed by FedEx ($65 billion), United States Postal Service (USPS) ($31 billion) and Amazon Logistics ($24 billion). USPS was the parcel shipment leader in 2022, with 6.7 billion parcels.
‘Tremendous opportunity’ in ecommerce
As mail volume continues to decline, “postal and mailing businesses are shifting from state-owned monopolies to commercial companies with diversified portfolios,” says Mordor Intelligence, a global market research firm.
That means government and private carriers favor collaboration as much as competition. While USPS has a legal monopoly in the delivery of letters, it contracts air transportation to major express delivery companies as FedEx and UPS, which in turn contract some residential deliveries to USPS.
“Ecommerce represents a tremendous opportunity to postal services as consumers become increasingly comfortable with ordering items online from emerging ecommerce platforms, as well as traditional brick-and-mortar making the transition to digital environments. As the volume of online sales increases, ecommerce providers are seeking cost-effective channels for the delivery and collection of purchased items,” says Mordor Intelligence.
And government postal services, with their long-established national networks and experience in last-mile delivery, “are emerging as effective partners in this regard,” according to Mordor Intelligence.
Robust mail service builds national strength
Looking ahead, Pitney Bowes, a global shipping and mailing company that provides technology, logistics and financial services to more than 90% of the Fortune 500, forecasts that parcel volume will continue to rise, reaching $28 billion by 2028.
The carrier industry’s recent revenue figures indicate a “capacity to meet and overcome … challenges … as economic challenges mount and consumer behavior continues to shift,” says Shemin Nurmohamed, president of sending technology solutions for Pitney Bowes.
“Whether used to distribute government documents (e.g., driver’s licenses and court papers), for marketing and business development, or personal correspondence, a strong mail system means a strong America. It cannot, and will not, ever be entirely replaced by electronic communication,” asserts Paul Steidler, a senior fellow the Lexington Institute, a policy think tank, writing in online business news source RealClearMarkets.
