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UPS Flat Rate Box Pilot Tests in AZ and NC

MBE corporate recently announced a pilot test of the new UPS Flat Rate Box, scheduled to run from October 2010 through January 2011 in Tucson, AZ and Raleigh, NC.

TUPSS owners have eagerly awaited the arrival of a flat rate product from UPS, and while we appreciate that Corporate is testing new things, the ICFO will be closely watching the results of the pilot, specifically with regard to the following key issues affecting our center profitability:

Exclusivity
In Tucson, UPS will test the product at The UPS Store and UPS Customer Center locations only, but in Raleigh, the flat rate box will also be available at Walgreens and Costco.

Margins
Pilot locations will sell the flat rate box for a maximum retail price of $11.99, which translates to just a 25% margin, less royalties. Stores will also collect a drop-off fee if customers return to The UPS Store to ship the package.

Effect on other services
Will the lower-margin flat rate box cannibalize existing UPS Ground sales? Will its availability at other retailers (in non-exclusive test markets) hurt our business? Or will the new product, combined with local marketing and advertising efforts, bring in enough new and repeat customers to offset any potential loss in profits?

Ability to upsell
Customers who purchase the flat rate box will need to go online to a special UPS Flat Rate Box website to activate their SKU and provide shipping details to UPS. There they will have the option to use a credit card to purchase Declared Value, Delivery Confirmation, Signature Required, or Adult Signature Required accessorials, as well schedule and pay for a Same Day Pickup.

However, if the customer is unable to go online to process their shipment (or is standing in your store and wants to ship on the spot), they will need to use the manual shipping document included in the shipping kit, with which no additional accessorials are available.

Will store owners receive any portion of accessorials if a flat rate box is purchased and shipped from our stores, or do we lose the opportunity to upsell? How will customers react to our explanation that they need to leave the store (or switch to Ground Service) to purchase these additional options?

Upfront costs/cash outlay
Pilot locations are required to purchase the boxes from UPS upfront, meaning that store owners will need to estimate sales and carry inventory.

What other questions or concerns do you have about the flat rate box pilot? Leave a comment below, or drop us a line at icfo4all@gmail.com.

2 Responses

  1. I’m very wary of the flat rate box program. I am convinced that it will only benefit UPS, and not our stores (aka The Apple Returns…we get $4, UPS gets NDA). I did not want a flat rate solution for the very reasons that are beginning to unfold, and I promise you, it will get uglier before all is known. UPS does nothing but to its own benefit, and it does not believe that helping our network is a benefit to them. I have been successful selling customers on standard UPS solutions when they come in asking for flat rate boxes. Now we are taking away the insurance, the guarantees, and the profits. It is starting to look like the same businesss model the post office uses….undersell, take away all the benefits, and force a cheaper solution (that will be much more difficult) upon the consumer, at the network’s expense.

  2. TUPSS owners should REJECT this concept firmly and without exception.
    1. 25% margin is a joke for a retailer to pre-pay.
    2. We’ll force fedex into the flat rate biz …walmart and target and costco will superlow bid for the chance to sell.
    3. Flat rate boxes blatantly negate any value you as an owner have in the shipping/packing biz.
    4. Until they show it otherwise, UPS doesn’t care about your profitability, the value of your investment in your store, they only care that enough stores survive to be there service stations and drop boxes or whatever and however else they can improve shipping market share.
    5. USPS loses billions of dollars a year! What owner, in their right mind wants to emulate their business practices.
    6. Once the logistics (no joke) is set up for the flat rate box scenario, whats preventing the platform to move to any retailer for any size box. Once again, UPS’s plan would include YOUR store to drop the box off.
    7. How are you going to compete w/ corporate FED EX store when their ship anywhere flat rate boxes are $10.50 and yours are $11.99 at 25% gp? Are you going to sell even cheaper?

    I hope you all stand firmly against this. And will somebody please tell UPS to send us customers who want to spend money with US!
    If it does happen, I will not buy them and I will not accept drop offs of flat rate boxes.

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