Walmart to expand shipping perks for shoppers ahead of the holidays
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In the fight for shoppers’ holiday dollars, retailers are increasingly touting perks like free shipping and easy returns.
Walmart said Tuesday it is expanding two-day shipping and in-store returns to many items sold by third parties on its website next month, just ahead of the busy holiday shopping season.
The move comes as rivals Amazon and Target have been improving their own shipping perks to persuade shoppers to pick them over the competition. When it gets down to the last minute, shoppers who procrastinate later this year will be flocking to the retailers that can get items to them fastest before Christmas.
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Global Postal System Fast-Tracks Rate Review After Trump Pullout Threat
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By Heidi Vogt
Discounts established to help less-developed countries have continued to apply even as China has become a major e-commerce shipper.
WASHINGTON—A Trump administration threat to pull out of a global mail system over its discounted shipping rates from China could spur a change in those rates as early as April, the head of the United Nations agency that oversees the system said.The U.S. last week started a year long process to withdraw from the 144-year-old Universal Postal Union because it had failed to eliminate international discounts. Those discounts, aimed at helping developing countries, have continued to apply to China even as it has grown to become the world’s second-largest economy. They can make it cheaper to ship small packages from China to the U.S. than from locations within the U.S.
The move was the latest salvo by the Trump administration against China and a reminder of the president’s willingness to abandon international organizations that he says don’t help U.S. interests. American manufacturers welcomed the move, saying the flood of cheap goods from China undercut their business. The UPU, which is now holding previously scheduled council meetings, commissioned a report Tuesday that is the first step toward fast-tracking new rates, Director General Bishar Hussein said in an interview.
“If we work fast enough, and the member countries are all in consensus on these issues and decisions are made, by April next year I think it is a possibility,” Mr. Hussein said.The discounts also benefit countries including Russia and Mexico. The U.S. has stressed that its decision isn’t only about China, though that obviously is a large factor. Administration officials have said the lower rates cost the U.S. Postal Service some $300 million a year, with discounts ranging from 40% to 70%. Mr. Hussein said he welcomed the move by the U.S. if it manages to reform the group’s “archaic” rates.
“Now with the U.S. coming in and saying, ‘Sorry, enough is enough,’ I think this is going to take the conversation to another level, and I’m very happy to see that,” Mr. Hussein said.
Mr. Hussein stressed that even a fast-tracked process has many steps, including the research report, a proposal and a vote by members. At least half of the organization’s 192 members have to vote for a proposal to be considered, and it can pass only with a two-thirds majority.
If the U.S. were to withdraw from the UPU, it would lose access to global processing and coding systems that make international mail possible, and it would have to negotiate bilateral postal agreements with every individual country, Mr. Hussein said. The U.S. has said it hopes to negotiate a solution that keeps it from having to withdraw from the UPU, but also has said it is proceeding with a plan to institute “self-declared” rates that could take effect within six months.
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Target Rolls Out Free 2-Day Delivery Ahead of the Holidays
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The big-box brand with the bullseye dog are at it again, putting a target on competitors’ backs.
In the never-ending pursuit of Amazon and seeking separation from other foes like Walmart, Target has announced the availability of same-day delivery in 46 states ahead of the peak holiday season from Thanksgiving through Christmas. The company is also offering free two-day shipping plus curbside pickup on hundreds of thousands of items with no purchase threshold, from Nov. 1 to Dec 22.
Frank Poore, CEO of ecommerce software firm CommerceHub, said the continual push toward “free” and “fast” by the big three just raise the pressure on the rest of the field to keep up, citing Walmart’s non-subscription-based program and incentives for store pickup, in addition to Target.
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Managing Through Record 2019 USPS Rate Increases
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Recently, the USPS proposed a record price increase. If approved, which is expected, the higher rates will go into effect on Jan. 27, 2019. This will be the biggest rate increase in USPS history. Amazon’s retail operating income would take a 5 percent hit from shipping cost inflation if the new rates take effect, according to Barclays.
Here are some of the significant proposed 2019 USPS Shipping rate changes:
- The elimination of Commercial Plus Pricing (CPP), where now Priority Mail pricing will match Commercial Base Pricing (CBP). Many e-commerce and subscription trade shippers will be facing a painful price increase with the elimination of CPP programs.
- A conservative 5.9 percent Priority Mail increase is expected, while First Class Flat Pricing will change to zone-based pricing with an expected 11.9 percent increase. For shippers with a high proportion of outer zone shipments, the increase will be appreciably higher (as much as 21 percent).
- Perhaps most concerning is the pending reaction of UPS and FedEx as they re-evaluate their “hybrid” postal delivery products that use the USPS for last-mile delivery. Buried in the postal rate change are increases ranging from 9 percent to 30 percent on the work-share rate structures used by UPS and FedEx.
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NRF Forms a Package Coalition to Lobby around USPS
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Total Retail’s Caitlin Sullivan and Joe Keenan discuss the National Retail Federation’s (NRF) new Package Coalition, a lobbying group in support of the U.S. Postal Service.
The coalition is being led by Amazon.com and other retail businesses, including QVC and Columbia Sportswear. In addition to analyzing the merits of the Package Coalition, the hosts offer tips for retailers to optimize their shipping rates.
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Both USPS and Amazon Experience Data Security Glitches
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In the midst of the kickoff to the busiest shopping season of the year, news emerged that both the U.S. Postal Service and Amazon experienced data glitches that exposed customer information.
The USPS may have exposed the personal data of more than 60 million customers via a security hole, including access to information on when checks and other critical documents were set to arrive. Amazon meanwhile told an unknown number of customers their names and email addresses were exposed due to a technical error on its ecommerce site.
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USPS Price Hikes on Jan. 27 to Cost Amazon More than $1 Billion
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Amazon.com Inc.’s retail operating income could take a 5% hit from shipping cost inflation if the U.S. Postal Service’s proposed price hikes go into effect, according to calculations by Barclays analysts. The proposed uptick in shipping and mailing fees at the U.S. Postal Service could cost Amazon more than $1 billion in 2019, according to Credit Suisse, which cut its near-term estimates for operating profit on the e-commerce behemoth.
“As we roll forward the sensitivity analysis to 2019, we arrive at a potential incremental Shipping Expense range of $400 million to $1.1 billion range with the assumption that 40 percent to 50 percent of U.S. packages are shipped via the Postal Service,” analyst Stephen Ju wrote Monday. “Our math …suggests Amazon will have 5% lower retail operating income from this shipping cost inflation, if we assume there are no offsetting factors,” Barclays said. The changes would go into effect on Jan. 27, 2019.
“Specifically, the USPS shipping rates for small and medium boxes, typically used by e-commerce companies, are proposed to be increased by 10% and 5% respectively,” Barclays analysts led by Ross Sandler wrote. “[T]he price increases for packages suggested by USPS this year are higher than in prior years.”
“If other Amazon shipping partners like UPS, FedEx, On-Trac, etc. raise their prices, which has happened in the past (but we are currently not factoring in), every 5% hike for last mile would weigh down operating income by an additional 3%, all else constant,” the note said.
President Trump said the USPS is Amazon’s “delivery boy” in a tweet earlier this year, and blamed the e-commerce giant for its billion-dollar-plus losses in the second fiscal quarter. However, the USPS said it’s actually government policy that’s hurting the group’s finances. The USPS said “legislative and regulatory changes” would be necessary for financial stability.
“To be clear, our current estimates already factor in [a] shipping cost increase by a modest level, consistent with prior years,” Barclays said. “However, the steeper increase proposed for 2019 could weigh further on Amazon’s FY19 profitability.”
Barclays forecast that Amazon shares could take a hit after third-quarter earnings if they are in line with guidance and forecast below expectations. And in the fourth-quarter, the $15 minimum wage hike will add about $310 million to expenses.
Amazon will already see declines due to the $15 minimum wage hike, analysts say. Barclays analysts think the minimum wage hike is just one of a few coming initiatives that could impact operating margin expansion.
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The Post Office Wants to Raise the Fees it Charges Amazon and Other Shippers
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The U.S. Postal Service has proposed a 9 to 12 percent increase in fees for the shipping service used by Amazon, just months after President Donald Trump criticized the USPS, saying it gives Amazon too good of a deal.
The parcel select service, which is also used by United Parcel Service and FedEx, is the last and typically the most expensive step in the shipping process that gets the packages to customers’ doorsteps. The USPS proposed a 9.3 percent increase on this service for packages weighing over one pound and a 12.3 percent increase on lighter packages.
Trump issued an executive order in April to set up a task force to examine the USPS, claiming that it was on an “unsustainable financial path.” He’s also tweeted that the USPS is Amazon’s “delivery boy” and doesn’t make money from Amazon’s business.
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UPS 2019 Rate Increase of 4.9% Given 3 Weeks Before Effective Date
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Less than three weeks before the prices take effect the day after Christmas, UPS announced its 2019 rate schedule, including an overall rate increase of 4.9% for its ground, air and international services, leaving shippers scrambling to adapt at the busiest time of year.
Last year UPS announced its general rate increase (GRI) in October, and in September the year before that. FedEx announced its 4.9% GRI for 2019 in early November. While the new FedEx rate schedule takes effect Jan. 7, UPS’s hike happens as of Dec.26, meaning it will hit the first massive wave of Christmas returns.
“This year (UPS) announced it three weeks before the effective date and in the heat of the fourth quarter peak shipping,” said parcel consultant Jerry Hempstead. “Large shippers will have little time nor the IT resources to sift through the nuances of this year’s announced changes.”
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Amazon Will Spend $800M to Bring Free One-Day Shipping to Prime
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At the company’s quarterly earnings call, CFO Brian Olsavsky disclosed that Amazon is working to shorten its promised two-day shipping on Amazon Prime to one day. It’s going to cost the company a lot of money, however.
At the company’s quarterly earnings call, CFO Brian Olsavsky disclosed that Amazon is working to shorten its promised two-day shipping on Amazon Prime to one day. It’s going to cost the company a lot of money, however.
Olsavsky said it would cost about $800 million, which will likely eat into Amazon’s bottom line in the coming quarters.
“We’re trying to take advantage of the fulfillment capacity and transportation capacity . . . that we have,” the CFO said. Amazon’s push for faster delivery has put a lot of pressure on other retailers to speed up their ecommerce order fulfillment.
As for a timeline, Amazon wouldn’t give too many specifics. “We expect to make steady programs quickly and through the year,” Olsavky said, but wouldn’t say whether it would be fully rolled out by the holidays.
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