DOMESTIC PRODUCTS 11 USPS Shipping Services Meeting Business Needs in 2011 and Beyond Bill Vanderveer Commercial Shipping Specialist Greater Michigan District

DOMESTIC PRODUCTS 22 Overview 1)The business environment in ) USPS products and pricing to improve business efficiency & reduce costs 3) More ways USPS adds value

DOMESTIC PRODUCTS 333 Domestic Products The business environment in 2011

DOMESTIC PRODUCTS %Manufacturing growth, capital expenditures to increase by 14.5% in 2011 ―Institute for Supply Management semi-annual forecast Fulfillment growth: 12% increase in online shipping 2010 holiday season compared with 2009 Growth prospects in 2011

DOMESTIC PRODUCTS 5 But... Weather Events in much of U.S Rising fuel costs Businesses and consumers quickly using up any financial ‘cushion’ No one can afford to ‘blow’ their shipping budget

DOMESTIC PRODUCTS 6 Strengthening the business to consumer channel Improving the customer experience Competing for package business Becoming a leaner, faster, smarter organization Postal Service core business strategy

DOMESTIC PRODUCTS 7 U.S. Postal Service Commercial Resources

DOMESTIC PRODUCTS 8 USPS Shipping Products

DOMESTIC PRODUCTS 9 Free shipping has become a major decision factor for e-commerce consumers. ComScore reported that 73% of shippers consider free shipping “somewhat important” or “very important” when making online or catalog purchases. 73% Source: comScore, Inc. eCommerce trends

DOMESTIC PRODUCTS U.S. Domestic Shipping Volume By Length of Haul 10 Colography % of shipping volume in Zone 1-3 (≤ 300 miles)

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Fuzzy Math--What is a Net Minimum? Published Daily Rate 5 pound Ground to Zone 5 $7.00 Your Contract Discount [e.g. 50%] -$3.50 Rate is higher of two, either Net Minimum or discounted rate $5.17 $1.67 of discount (24%) eliminated by Net Minimum Actual Discount is about half [e.g.26.1%] Add Accessorial fees and surcharges 8.5% $0.44 Residential DAS $2.75 Total cost to ship $8.36 Same package upgraded to Priority Mail Regional A $5.19 Savings for this example $3.17

DOMESTIC PRODUCTS 13 Gaining new ground options Leverage existing network Appeal to regional shippers Utilize sort capacity – Incent entry points deeper in network

DOMESTIC PRODUCTS 14 Small, dense parcels with max. weight of 15 or 20 lbs Delivery in 2 days to most of the lower 48 states 70% discountRegional rate provides up to a 70% discount from retail rates No minimum annual volume requirement Commercial Only Returns too Priority Mail Regional Rate Boxes™ Speed, price and convenience with Tracking Box Type“A” (15 lb max.) Cubic Size.21 (Inside) “B” (20 lb max.) Cubic Size.41 (Inside) Side Loading Box13 1/16 X 11 1/16 X 2 ½ inches 16¼ x 14 ½ x 3 inches Top Loading Box10 ⅛ X 7 ⅛ X 5 ½ inches 12 ¼ X 10 ½ X 5 ½ inches

DOMESTIC PRODUCTS 15 New in April 2011 Parcel Select™ Regional Ground Economical ground option for lightweight parcels Low price makes it possible for business to offer “free shipping” to their customers For commercial shippers only; annual volume threshold 10,000 pieces Parcels: 1-5 lbs with a cube restriction 0.35 cubic ft Authorized drop points throughout our network Tracking included

DOMESTIC PRODUCTS 16 Zone 1-2Zone 3 Parcel Select Regional Ground Up to 2 lbs Entry Level ONCD OSCF $ 3.78 $ 4.03 Entry Level ONCD OSCF $ 3.78 $ 4.03 Up to 3 lbs Up to 4 lbs Up to 5 lbs Priority Mail Regional Rate Box Box A (up to 15 lbs) Commercial Base Plus $ 4.97 Commercial Base Plus $ 5.08 Box B (up to 20 lbs)$ Price comparison within zone 3

DOMESTIC PRODUCTS 17 First-Class Mail Parcels New in April 2011 Retail, Commercial Base (includes Presort) and Commercial Plus pricing Commercial Base single-piece pricing offers advantage over retail on parcels up to 13 oz. For qualifying customers, Commercial Plus pricing is highly competitive on parcels weighing between13–16 ounces, with service standard of 1-3 days within contiguous U.S. Gap between First-Class and Standard parcel narrows

DOMESTIC PRODUCTS 18 Last-mile delivery Solid partnerships & expanding relationships Efficient, reliable B2C shipping Hold For Pickup available Standard Mail® Parcels reclassified as “competitive” and will become a category within Parcel Select in Jan UPS Ground “Basic”, DHL “Global Mail”, FedEx “Smartpost” Parcel Select®

DOMESTIC PRODUCTS 19 Pushing the envelope New products help you do business Document shipping― $15 billion/yr Cost cutting Flat Rate options, 2-day delivery Also useful for B2C product fulfillment

DOMESTIC PRODUCTS 20 Priority Mail Flat Rate Envelopes Six uniformly priced Flat Rate Envelopes meeting multiple shipping needs ($4.75 & $4.95) Regular12½ X 9½ inches Legal15 X 9½ inches Padded12½ X 9½ inches Gift Card10 X 7 inches Small10 X 6 inches Window10 X 5 inches Documents, flats and lightweight shipping Commercial Base, Plus, and contract pricing available. Priority Mail Padded Flat Rate Envelope for small merchandise (apparel, jewelry, electronics)

DOMESTIC PRODUCTS 21 Two Flat Rate Envelopes (legal and regular) sell for same low price ($17.40 flat rate & $12.96 metro) Lowered volume threshold for Commercial Plus Pricing (5,000 pcs/year) Guaranteed Overnight reach Economical 2 nd -day delivery options Sunday & Holiday options Express Mail envelopes

DOMESTIC PRODUCTS 22 Critical Mail™ Large envelope 9 X 12 in, flat contents up to 13 oz. Small envelope 5¾ X 9 in, flat contents up to 3 oz. High visibility; design drives “open first” behavior Delivery 1 to 3 days 5,000 pieces/yr to qualify Machineable letters and flats Intelligent Mail™barcodes provide free tracking Accountable mail For documents, tickets, & urgent materials

DOMESTIC PRODUCTS Critical Mail*Certified Mail Critical Mail* vs. Certified Mail Total CostTotal Cost Letter (3oz Max) $3.50 Flat $4.25 (13 oz max) Tracking—complete audit trail from entry, through processing, and delivery event Envelope—supplied by US Postal Service Prepared and processed in Automation Environment Certified Fee = Postage + $2.85 Postage 3 oz Ltr $0.84 3oz Flat $1.28 Electronic Receipt $1.15 Total CostTotal Cost Letter (3 oz) $4.84 Flat (3 oz) $5.28 (13oz $7.28) Tracking—at delivery end only Envelope—supplied by customer Visible at delivery end only *5,000 annual volume and agreement required

DOMESTIC PRODUCTS 24 Prepaid Forever Priority Mail Flat Rate Packaging Priority Mail Large Flat Rate Game Board Box Pay-As-You-Go Flat Rate Boxes** Express Mail Flat Rate Box** ** under PRC consideration USPS Flat Rate story continues…

DOMESTIC PRODUCTS 25 Can be 2-3 times the cost of processing outbound shipment Poorly handled returns can erode 30-35% of profits Effective returns strategies are critical & should include: – Customer convenience – Easy Drop off – Prepaid Barcoded Label – Credit issued promptly – Visibility USPS solutions provide a fit Smart Returns

DOMESTIC PRODUCTS 26 First-mile service leverages unique delivery & retail advantages of USPS – 21 Network Distribution Centers – 20,000+ Post Offices Postal Service picks up at point of origin; business partner hands off near origin Consumer receives the best of both worlds (i.e., USPS moves shipment to pickup point of their choice). Merchandise Return Service (MRS) Premier end-to-end service, customized to fit your business needs Ability to put a barcode on every piece First-Class MRS a low-cost option Available with Priority Mail Regional Rate; Cubic & Commercial Plus Pricing; First-Class Mail Parcels; Parcel Post Parcel Return Service (PRS)

DOMESTIC PRODUCTS 27 New Pricing

DOMESTIC PRODUCTS Price Changes January 2011: USPS overall average price increase of 3.6% for all shipping categories Increases lowest (or nonexistent) for commercial customers Market-based and calculated to drive volume sales & encourage growth in small parcel B2C shipping AVERAGE OVERALL Commercial Plus RETAIL Priority Mail3.5%2.03.9% Express Mail4.6%(-5%)5% Parcel Select4.4%n/a Parcel Return3.1%n/a

DOMESTIC PRODUCTS 29 USPS applies dim weight only to Priority Mail packages > 1 cubic foot traveling by air to Zones 5-8. The divider for 2011 remains 194 for domestic shipping. USPS approach is to use Priority Mail Cubic Pricing to incent better dims. No Dimensional Weights for Express Mail Domestic or any International Dimensional (DIM) Weight

DOMESTIC PRODUCTS 30 = Priority Mail Cubic Pricing Saving money by saving space USPS is a pioneer in space-efficient shipping To qualify: Commercial Plus Pricing customer > 250,000 pieces in previous calendar year Customer Commitment Agreement Price is based on cube and zone--not weight (up to 20 lbs).

DOMESTIC PRODUCTS 31 More ways USPS adds value

DOMESTIC PRODUCTS 32 36,000 retail locations 2,500 Automated Postal Centers ( 252,000 daily transactions ) Nearly 1 million delivery points added to the delivery network each year (3,048/day) Access and convenience USPS.com 3rd most trusted site in privacy ( Ponemon Institute, 2009 ) 1.1 million visits each day Top USPS.com functions in ZIP Code lookup 2.Track & Confirm™ 3.Calculate Postage 4.PO Locator 5.Change of Address

DOMESTIC PRODUCTS 33 More scans: Four scans ≥ 95% of time Every Express and Priority Mail item tracked with an average 7 scan events: Acceptance Outgoing Sortation Incoming Sortation Arrival at Unit Processing Complete Out for Delivery Delivered More ways to track: Track and usps.com Mobile phone applications 3 rd Party dynamic online tracking Visibility & Tracking

DOMESTIC PRODUCTS 34 2 Days to most of the continental USA from origin 488 Lansing USPS-supplied packaging Convenient, free pickup options Multiple tracking scans with electronic Delivery Confirmation (electronic or manifest mailing) Free forwarding and returns No surcharges Domestic rates to Alaska, Hawaii, Puerto Rico, Guam, U.S. Virgin Islands and most APO/FPO/DPO destinations. The expedited advantage

DOMESTIC PRODUCTS 35 We own the mailbox (more deliveries on first try) 36,000 local Post Offices for pick up of undelivered pieces More locations than any other carrier—including APO and P.O. Boxes Security backed by the U.S. Postal Inspection Service Improved tracking Pricing to fit all needs Sustainability standards--eco friendly More reasons to ship USPS

DOMESTIC PRODUCTS 36 Let us provide actionable data for your decision process