# Presentation: 403849

## Managing Your 		Returns Process

## Remote Shopping is Growing

- December 2002 NRF Sales Data
- Direct retail up   18.1%
- Store sales up  2.2%
-  More room to grow
- Brick & mortar approximately                     90% of retail

**Notes:**
Why are “parcel returns” getting so much attention?
As you may know, and this was especially true last holiday season, catalog and online sales are growing – and they are growing faster than retail sales.  The National Retail Federation says that in December, direct sales were up 18%, much greater than the retail growth.
That growth means more outbound packages, and, in turn, more returns.
And there is room to grow.  90% of retail sales are still at stores.
In fact, the Direct Marketing Association estimates that internet and catalog will both grow faster than retail overall.
Another factor that might spur growth is the industry’s view that “ease of returns” can spawn more growth in online/catalog sales.  When consumers are asked what keeps them from buying online, they often mention “paying for returns” and “ease of returns”.  
Merchants understand this, and are seeking “returns solutions” to make it easier and cheaper to deal with returns.  
So, this growing market, and the search for streamlined return processes, has spurred interest from parcel carriers in the parcel return portion of the industry. Our marketing strategy is to focus on growth markets.
Sources:  Shop.org estimates Internet at 3.2%
	DMA estimates catalog about three times Internet

## Fast Fact 

- Fast Fact

- Today
- 34 million households shop online
- 2008 Projection
- 63 million households will shop online

***Source:  Forresters Research, July 2003***

**Notes:**
Why are “parcel returns” getting so much attention?
As you may know, and this was especially true last holiday season, catalog and online sales are growing – and they are growing faster than retail sales.  The National Retail Federation says that in December, direct sales were up 18%, much greater than the retail growth.
That growth means more outbound packages, and, in turn, more returns.
And there is room to grow.  90% of retail sales are still at stores.
In fact, the Direct Marketing Association estimates that internet and catalog will both grow faster than retail overall.
Another factor that might spur growth is the industry’s view that “ease of returns” can spawn more growth in online/catalog sales.  When consumers are asked what keeps them from buying online, they often mention “paying for returns” and “ease of returns”.  
Merchants understand this, and are seeking “returns solutions” to make it easier and cheaper to deal with returns.  
So, this growing market, and the search for streamlined return processes, has spurred interest from parcel carriers in the parcel return portion of the industry. Our marketing strategy is to focus on growth markets.
Sources:  Shop.org estimates Internet at 3.2%
	DMA estimates catalog about three times Internet

## "Reverse Logistics costs may exceed $35 billion a year for U.S. companies."

Reverse Logistics 
Executive Council 2002

"Consumer-Direct return volumes  are forecasted at 182 M units in 2003."

Colography Group 2002

*Reverse Logistics *
*Executive Council 2002*
*"Consumer-Direct return volumes  are forecasted at 182 M units in 2003."*
*Colography Group 2002*

- Market Forecasts

## USPS Market Share

**Notes:**
As I mentioned earlier, there is little agreement about the size of this return market – estimates range from about 200 million to 700 million.  These bars show the various estimates.  Our 86 million returns translates into a share of 50%, down to about 12%, depending on which estimate of total market is used.   

{We need to tread lightly here....maybe even say we tend to think the lower end estimates of market are more reasonable, but in any event, there may be an opportunity here to improve our market share.)

## USPS Offering Today

- Recently revised website to make returns more visible
- Consumer - Selected
- Promote “Click-N-Ship” for returns
- Merchant - Directed
- Promote Merchandise Return Service
- Electronic Merchandise Return         (Web tool)

**Notes:**
So what can we do in this market?  On the consumer side, we can make it easier for consumers to choose us.  Our ongoing efforts to improve our retail operations should help, as well as our new web-based “Click-n-Ship” tool that allows consumers to print labels and pay postage on line.  This application is being dually positioned on usps.com as a return solution.   This will enable customers to simply give the return to a carrier, or drop it in a nearby collection box, or take it to any post office.  
On the merchant-directed side, we are more aggressively promoting our existing Merchandise Return Service which enables merchants to include a pre-printed return label with their customer’s order, or send it to them via, mail, email or fax. 
One way to make it more attractive for merchants to sign up is to promote Electronic Merchandise Return.  Rather than including a label inside the package that they send to consumers, merchants can use our Web Tool to enable their customers to print a return label directly from the merchant’s site.  
Of course, our pricing constraints make it impossible to do the sort of bundling that we see our competitors doing, but we can use the pricing tools available to us to try to offer distinct commercial pricing.  Again, remember that our prices are the same under both the consumer and merchant models.  

## Merchandise Return Service Options

- Level of service
- Priority Mail
- Package Services
- Parcel Post, Special Standard, Bound Printed Matter, Library Rate
- Special Services
- Insurance
- Delivery Confirmation
- Mailing Acknowledgement

## Benefits of Merchandise Return Service

- Merchant controls
- Label distribution
- With order, by mail, email, online or fax
- Level & cost of service
- Where returns are delivered
- Merchant only charged for packages returned
- Customers simply affix the label to the package
- Drop it in a collection box
- Hand it to their letter carrier
- Bring it to any Post Office location

## Commercial Challenge

- USPS is not the dominate player in the ground shipping business
- By default, many customers return items using the carrier that delivered their merchandise
- Capturing a greater piece of the returns market requires a greater incentive

**Notes:**

The challenge for us is to offer a returns

UPS has 57% of total outbound market and FedEx has 18%

Customers, by default,  tend to return items by the same carrier that delivered the original package

Capturing a greater piece of the returns market requires a greater incentive

## Commercial Pricing Opportunity

- Parcel Select success
- Use our available pricing tools
- Worksharing discounts
- Lower prices in exchange for cost-reducing behavior

**Notes:**
Parcel Select Returns attempts to gain market share  by copying the success we have had with Parcel Select.
Our goal is to create a Return service offering that is easy to use and carries an attractive price point.

To obtain commercial pricing, we have to use the tools that are available to us.  Historically, and quite successfully, we have used “worksharing discounts” as a way to price discriminate among market segments.  
We offer lower prices in exchange for cost-reducing behavior that commercial mailers can undertake.  
We believe the Returns Market presents an opportunity to use this lever once again.

## Parcel Post Volume Trend “Workshare Re-bound”

- Parcel Post Volume Trend “Workshare Re-bound”

**Notes:**

There are many examples of how we have used worksharing to bolster volume, but one of the more recent examples is Parcel Select.
You can see that Parcel Post was in a steady decline through the 1980’s.  But the trend turned around in 1991 with the introduction of DBMC rates, and continued to grow as Parcel Select was expanded to include DSCF and DDU rates.  
[Add something like:  Now it is true that Priority Mail suffered some volume loss during this time.  In the market overall, there has been a transition to ground products.  It could very well be that any migration from Priority Mail would have migrated right out of the Postal Service if not for Parcel Select. ]
So how would this work for parcel returns?  Well, let’s start by looking at some simplified mail flows...

## Parcel Return Services Experiment

- Two year experiment
- 3rd year if permanent classification filed
- Three new rates offered
- Parcel Select Return Service RDU
- Parcel Select Return Service RBMC
- Bound Printed Matter Return Service RBMC
- Drop ship in reverse – bulk pickup at a delivery unit or bulk mail center
- Avoids downstream transportation, processing and “weigh-and-rate” calculations

**Notes:**
Here is an overview of what we’ll be covering...
First of all, I’ll explain what parcel returns are, and discuss what activity has been taking place in the market
Then I’ll describe a potential test that will help us to decide if we can improve our position in the market,
And finally a recommendation regarding how to proceed with a test.

## Current Merchandise Return Service  

**Notes:**
This is a simplified version of how a returned ground parcel flows through our system today.
The consumer takes the package to the Post Office, or gives it to the letter carrier.   That parcel then flows to a mail processing plant, and on to a Bulk Mail Center that serves that local P.O.  
Unless the package is being sent to a location in that local BMC area, it will be sent on to another BMC – one that DOES serve the destination of the package.  It will then be transported to the P.O. serving the original shipper or the agent handling returns.  
As you can see, there is extensive handling and transportation involved in this process.  
The office serving the merchant will calculate the postage for the returns, and the merchant will pay.  For example, if the return weighs 3 pounds and has traveled a distance that would make it Zone 6, the price would be $5.71.  Again, this is the same price as if the consumer had paid the return postage.  

## Parcel Return Services Return BMC Option

**Notes:**
To obtain distinct rates for the merchants, we have devised several potential discount options.  The first option would cut a few legs out of the process.  Called “Non-local BMC”, this option would require the agent to pick up the returned parcels in bulk at their BMC.  This shaded blue part of the flow would be eliminated, and the merchant would take on the postage calculation duties, subject to our audit.  Instead of the $5.71 in the previous example, the price would be $4.84.  The 87 cent discount would apply to all “machinable” pieces under 35 pounds, and represents about 78% of the savings we realize when the merchant or their agent picks up the parcel. 
(Do we need something explaining why it is 87 for all pieces?)

## Parcel Return Services Return Delivery Unit Option 

**Notes:**
And finally, the “RDU” or Return Delivery Option.  
Some agents will pick up returns at individual post offices.  Our current Parcel Select service includes a rate for packages ENTERED at the local P.O., so many of these agents may be making a trip to the local office with these outbound packages.  While they are there, they may pick up the returns that have accumulated at that local post office. 
As you can see, the Postal Service incurs little or no handling and transportation of these packages.  Therefore, there is very little cost involved.  What cost there is doesn’t vary much with weight of the package, so there is one flat rate of $2.00 that applies to each of the packages. 

## Contribution

|  | Price | Cost | Contribution |
| --- | --- | --- | --- |
| Inter BMC1 | $5.71 | $5.37 | $0.34 |
| Intra BMC2 | $4.61 | $4.15 | $0.46 |
| RBMC | $3.74 | $2.84 | $0.89 |
| RDU | $2.00 | $1.10 | $0.90 |

**1** Based on a 3 LB, Zone 6 Machinable Parcel
**2** Based on a 3 LB, Zone 3 Machinable Parcel

## Parcel Return Services 

- Similarities to Merchandise Return Service
- No postage required on return label
- Only pay for labels returned
- Annual permit & accounting fee
- No special services included
- Postage paid through CAPS account

## Parcel Return Services 

- New features & requirements
- RDU
- Automated payment
- Residual pickup at servicing BMC
- RBMC
- Agent manifests return parcels
- Pickup every 48 hours at minimum
- Phase II will use e-VS
- Parcel Return Services barcode
- Postal routing barcode
- Only one permit and accounting fee required nationwide

## Parcel Return Services Labels

- Unique legend box identifying the item as Parcel Select or Bound Printed Matter Return Service
- The destination address of the RDU or RBMC
- Human-readable unique Mailer ID
- Parcel Return Services barcode
- Postal routing barcode

**Notes:**
The key to this worksharing opportunity is to facilitate more efficient handling by holding the parcels for pickup earlier in that mailstream.  In order to do that, special labels would be required.  I’ll show you the flows in a moment, but here are the labels specifically designed to enable the pieces to be identified and held for pickup.
Parcel Return Service labels will be similar in design to the existing label requirements for Merchandise Return Service as outlined in the Domestic Mail Manual, S923.  The primary modifications to the label design include elements that will allow the Postal Service to capture a unique parcel tracking number, and easily identify the Permit holder and shipper (or agent) for sorting purposes.  These modifications include:
•A unique legend box identifying the item as Parcel Select or Bound Printed Matter Return Service
•The destination address of the RDU or BMC (BMC address must include unique ZIP Code) 
•A human-readable unique Mailer ID to identify the shipper or agent
•A Return ConfirmationTM barcode
•A postal routing barcode identifying the unique ZIP Code assignment for the BMC where the parcels will be collected (RDU addressed parcels that bypass the delivery unit will be held for collection at the identified BMC)

## Labels

**Unique legend box identifying the item as Bound Printed Matter Return Service**

**Notes:**
The key to this worksharing opportunity is to facilitate more efficient handling by holding the parcels for pickup earlier in that mailstream.  In order to do that, special labels would be required.  I’ll show you the flows in a moment, but here are the labels specifically designed to enable the pieces to be identified and held for pickup.
Parcel Return Service labels will be similar in design to the existing label requirements for Merchandise Return Service as outlined in the Domestic Mail Manual, S923.  The primary modifications to the label design include elements that will allow the Postal Service to capture a unique parcel tracking number, and easily identify the Permit holder and shipper (or agent) for sorting purposes.  These modifications include:
•A unique legend box identifying the item as Parcel Select or Bound Printed Matter Return Service
•The destination address of the RDU or BMC (BMC address must include unique ZIP Code) 
•A human-readable unique Mailer ID to identify the shipper or agent
•A Return ConfirmationTM barcode
•A postal routing barcode identifying the unique ZIP Code assignment for the BMC where the parcels will be collected (RDU addressed parcels that bypass the delivery unit will be held for collection at the identified BMC)

## Offering a commercial parcel returns option will better position the USPS

|  | USPS Consumer
Driven | USPS Merchandise 
Return Service | Competitor 
Return Service | USPS Parcel 
Return Service
 |
| --- | --- | --- | --- | --- |
| Convenience |  |  |  |  |
| Print Labels |  |  |  |  |
| Merchant Payment |  |  |  |  |
| Commercial Pricing |  |  |  |  |
| Bundling Capabilities |  |  |  | * |
| Consumer Notification
and Payment |  |  |  | * |
| Merchandise Inventory
and Logistic Services |  |  |  | * |
| Tracking |  |  |  |  |
| Potential Partnership
w/ FedEx, UPS, etc. |  |  |  |         |

******* Could be provided by 3****rd**** party logistics providers**

**Notes:**
This table summarizes some of the features of returns products, and how we stack up with the competition.  
The middle two columns compare our merchant-driven offering to the competitors’.  For example, our merchandise service provides the first three features...convenience of entry, the ability to print labels, and merchant payment of postage.  But that is where the similarities stop.  Since our prices are our retail prices, and we can’t cut deals with individual mailers, we don’t offer commercial pricing.  While the experiment wouldn’t allow individual arrangements, it would introduce a price distinction for commercial vs. consumers.  
As I mentioned earlier, private carriers may bundle outbound and return services.  We can’t.  But, if our commercial pricing attracts consolidators, it may enable them to bundle outbound and returns.  
It is also possible that our pricing efforts may enable logistics firms to expand their businesses, and offer such services as consumer notification, or processing and inventory of returned goods.  
The labels for the new return service would include a barcode that would enable tracking.
And finally, we think there may be an opportunity to partner with other carriers who would like to be able to come to one location and pick up returns, rather than make house calls, which is sometimes the case.

## Who Qualifies?

- Up to 20 participants during 1st year
- Additional 10 during 2nd year
- Must pick up parcels from RDU or RBMC
- Every 48 hours
- Must be able to manifest parcels within 48 hours of pickup for RBMC
- RDU automatically charged from “Available for Pickup” scan
- Use logistics partner
- Consolidators
- Reverse logistics companies

## How to Become a Participant?

- Send a letter or email the request to:
- Manager, Mailing Standards
- sherry.l.freda@usps.gov
- See Postal Bulletin 22112 (Oct 2, 2003) for list of information required
- USPS review panel evaluates requests
- Approved participants will receive copy of service agreement and technical development guide

## Participant Responsibilities

- Prior to startup, mailer must:
- Complete and sign service agreement
- Complete system development
- Returns manifesting system
- e-VS file certification
- Open unique PRS Permit & Accounting Fee
- Receive approval for PRS client labels
- Develop pickup schedule with RDU/RBMC

## Uniform Code Council/European Article Number (UCC/EAN) Code 128 Barcode Symbology

## Parcel Barcodes

**Until January 9, 2004 parcel barcodes labels can be printed using one of the following barcode symbologies:**
**UCC/EAN Code 128**
**USS Code 128**
**USS Code I 2/5**
**USS Code 39**

## Parcel Barcode Switch Date

**Effective January 10, 2004 parcel mailers who want to qualify for the parcel barcode discount must print labels using the UCC/EAN Code 128 barcode.**
**UCC/EAN Code 128 Barcode is:**
**accepted industry-wide as one of the most reliable and compact formats available today  **
**more flexible and more compatible with the Delivery Confirmation barcode**

## UCC/EAN Code 128 Barcode Symbology

**Delivery Sort ZIP Code**
**(5-digit ZIP Code or the ZIP+4 Code )**

**UCC/EAN Code 128 – Concatenated – Code Structure **
**(Combines the 5-digit postal routing code and 20-digit **
**Delivery Confirmation or Signature Confirmation information)**

## Confirmation Barcodes

**Switch date for the Delivery and Signature Confirmation Barcode Symbology is September 2004.**

**(20-digits)**

## Benefits of UCC/EAN Code 128 Barcode

**Variable Length Barcode 5 digits up to 29 digits.**
**Improvement of first time read rates**
**Increased accuracy **
**Reduction of manual processing**
**Built in error detection**

## Barcode Issues

**Non-compliance of current DMM  specifications**
**Poor quality mailer applied barcode**
**Applying multiple barcodes**
**No barcode address label found on parcel**
**Barcode label partially covered with another barcode label**
**Barcode label damaged due to improper placement**