UPS to Offer Money-Back Guarantee; Kelly Blasts USPS

United Parcel Service of America has announced that it will offer money-back guarantees on on-time deliveries of commercial ground shipments, beginning May 4. Meanwhile, UPS president James Kelly took on the U.S. Postal Service for “thumbing its nose at the free enterprise system.”

Rates will not be affected by UPS' new guarantee, which applies to the 48 contiguous United States, and customers will not have to specifically request it. The guarantee will not apply to UPS' residential deliveries as all one-, two- and three-day express services already offer the option.

The service will allow for “more than 7 million packages [to be] added to the current 1.8 million that are guaranteed through our express air premium products and international express products,” said Ken Sternad, a spokesman for UPS, Atlanta. The move “responded to customer needs for planned, scheduled deliveries, as well as options for urgent express shipments.”

There will be no extra charge for the service because “there is no additional paperwork necessary, and no additional labeling or package preparation will have to take place,” said Rick Campana, UPS' vice president of marketing.

“We plan to grow our business by offering this guarantee, and it's been our objective all along to add value to our service portfolio,” he said.

Although UPS declined to discuss the cost of implementing the service, Sternad said, “You can't do something of the magnitude of guaranteed ground without a substantial investment, but it's no different from the investment made in technology over the last few years in building [our] infrastructure.”

Industry analysts said guaranteed on-time delivery has been the dividing line between other services that command a high premium, such as FedEx overnight letters, and more traditional low-cost shipping options, such as USPS' Priority Mail. The move undoubtedly will heighten competition among UPS and such carriers as FedEx, RPS and the postal service.

The USPS is experimenting with guarantees on two-day deliveries on the East Coast. Nicholas Barranca, vice president of operations support, said he hopes to offer guaranteed Priority Mail service nationwide within the next two years.

UPS' fighting spirit was evident in president James Kelly's speech at a National Press Club luncheon in Washington last week.

“The postal service is thumbing its nose at the free enterprise system by systematically attacking and undermining its private-sector competitors through unfair government-granted advantages,” Kelly said. “I'm here today to announce that UPS is going head to head with the postal service to expose them for what they really are — an anti-competitive, anti-free enterprise, government bureaucracy that wouldn't last one day in the free and open market of real competition.”

Kelly said the USPS enjoys a host of advantages not available to the private sector — sweetheart customs deals; exemption from local, state and federal taxes; exemption zoning regulations and anti-trust accountability — the kind of regulations that cost private-sector companies billions of dollars. The USPS “uses its government status to undermine the free-market system by subsidizing its competitive products with revenue from its First-Class monopoly.”

He said the USPS charges $26.63 to ship a 10-pound package via its Global Package Link service from San Francisco to London, but shipping the same package from Washington to Baltimore via Express Mail costs $28.80. The average market price for a comparable overseas package would be $110, he said.

“Common sense dictates that it should cost less to ship a package internationally than domestically,” he said. “These rates are so far below the average market rate that the postal service is essentially giving this service away.”

The postal service specifically targeted UPS' products with its new “What's Your Priority” ad campaign, Kelly said, adding, “We are forced by postal regulation to charge the American public twice as much as the postal service for our products that compete with Priority Mail letters. I'm hard-pressed to think of a better example of anti-competitive practices than setting your competitor's rates.”

In a farewell speech at the same event, outgoing Postmaster General Marvin Runyon rejected Kelly's criticisms and denied charges that it uses profits from First-Class mail to subsidize less profitable forms of mail and, according to news sources, said Kelly had mixed “apples and oranges” when he alleged an unfair price advantage for USPS' international products.

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