USPS’s service suspension in some global markets creates challenges for e-commerce shippers

At a time when coronavirus, or COVID-19, continues to wreak havoc on the economy, e-commerce retailers, in particular, have faced many challenges, as evidenced by this week’s release of United States March retail sales by the Department of Commerce. Problems, for some retailers with an eye on exporting into certain markets, were exacerbated earlier this month, when the United States Postal Service (USPS) announced that USPS operators are no longer able to process or deliver international shipments originating from the U.S. to more than 50 global markets, including India, Saudi Arabia, and South Africa, among others.

USPS’s processing and delivering of services in these markets is suspended indefinitely.

“The Postal Service received notice that various postal operators are no longer able to process or deliver international mail or services originating from the United States (U.S.) due to service disruptions related to the COVID-19 pandemic,” the USPS stated in an temporary service suspension notice published on April 1. “As a result, the Postal Service is currently unable to accept items destined for affected countries at any Post Office or postal facility location, effective April 3 until further notice.”

The USPS notice added that these service disruptions affect Priority Mail Express International (PMEI), Priority Mail International (PMI), First-Class Mail International(FCMI), First-Class Package International Service (FCPIS), International Priority Airmail (IPA), International Surface Air Lift (ISAL), and M-Bag items. And USPS added that for already deposited items, other than GXG (Global Express Guaranteed), Postal Service employees must endorse them “Mail Service Suspended — Return to Sender” and then place them in the mail stream for return.

This move by the USPS dints efforts being made by retailers to go global with their business. That is the word from Krish Iyer, Head of Industry Relations and Strategic Partnerships, for ShipStation, an Austin, Texas-based provider of Web-based e-commerce shipping services.

One of the biggest takeaways of this move by the USPS, said Iyer, is that that many of the markets where USPS has indefinitely suspended service are not insignificant by any stretch.

“There has always been a mantra in business to go global, as there are a few hundred million people in the U.S. and a few billion more globally,” he said. “You need to expand your region internationally, but, now, however, potentially 25% of the world is shut off from U.S. exports. That presents the question of how are you going to turn your operations inward into the U.S. to field different customers?”

As an example, Iyer explained that for a domestic shipment, the average selling price for an item is in the $50-to-$60 range, and a U.S. export for the same shipment is typically double that price.

“So, if you think about it as a retailer, and you have heavier volumes for an amount of your customer base that buys product outside of the U.S., you are essentially trying to replace that by a 2-1 ratio,” he said. “That is hefty…and you are going to have to dig deeper to find the customer in the U.S., in light of some of the challenges with delivery and related things that we are seeing like how you are locating your inventory and communicating your transit times. They are going to be more important than ever, when you consider that sales channels on both ends need to be closely monitored.”

Aside from now looking inward to grow, Iyer provided some insight on the ramifications of shifting from the USPS to the parcel duopoly of UPS and FedEx.

The way to look at it, he noted, is to essentially look in reverse, in terms of what are the reasons that a retail shipper would use the USPS for exports. Typically, most reasons are related to price sensitivity.

“If your average selling price is $100, then maybe you are willing to pay X amount for shipping, but if the selling price is $50, then you may not have that threshold for paying for a premium shipping service,” he said. “A lot of e-commerce shippers rely on the USPS, and a lot of that has to do with price sensitivity and de minimus [a price threshold to determine whether a discount bond should be taxed as capital gain or ordinary income]. If I buy a shirt online from London for $50, which is well under the $800 de minimus, what am I willing to pay in shipping?”

And as it relates to FDX and UPS, on one hand Iyer said the retailer can look at it and say, ‘OK, let me go ahead and say yes and switch to UPS or FedEx, where they may be a little more reliant or incumbent on the person buying the item, and say we are passing shipping costs on to the customer.

“The question needs to be really specific to retailers and the items and the brand and the selling price,” he said. “For a higher selling item, you may willing to pay the premium and at a lower price threshold, maybe they will and maybe they wont. It really is an individual question for each retailer, and there is not really a hard and fast answer to it.”