US Postal Service 2012 Annual Report Download - page 31

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2012 Report on Form 10-K United States Postal Service- 30 -
Shipping and Packages are predominantly competitive services which can be priced to reflect current market conditions
although there are some Market-Dominant services subject to price caps such as First-Class Parcels and certain package
services that are also included in this category. Price increases in January 2012, 2011, and 2010 positively impacted
revenues. At the same time increased mailings of packages continued as consumers used the internet more often to
purchase goods.
In 2012, Shipping and Packages, which includes premium services such as Priority Mail, Express Mail, and business-
oriented services such as Parcel Select, and Parcel Return Services, represented less than 2.2% of volume but generated
approximately 17.8% of revenue. Shipping and Packages revenue of $11,596 million increased $926 million, or 8.7%, in
2012 on a volume increase of 244 million pieces, or 7.5%.
In 2011, Shipping and Packages represented less than 2% of volume but generated approximately 16% of revenue.
Shipping and Packages revenue increased by $514 million, or 5.1%, in 2011 to $10,670 million on a volume increase of
201 million pieces, or 6.6%.
Priority Mail
Priority Mail, which represented 51% of total Shipping and Packages Service revenue, increased $304 million, or 5.4%,for
the year ended September 30, 2012, compared to last year. Priority Mail Flat Rate advertising campaigns continued to
contribute to increased revenues in that category. Initially launched in May 2009, this campaign reinforces the message
that the Postal Service is a convenient, simpler solution for shipping. In addition to offering “A Simpler Way to Ship”,
Priority Mail continues to offer a compelling value proposition, particularly for retail customers. E-commerce has grown at
a higher rate than traditional retail sales, which has helped to boost Priority Mail revenues.
Priority Mail, which represented 53% of our total Shipping and Packages Service revenue, increased $181 million, or
3.3%, for the year ended September 30, 2011, compared to 2010. The advertising campaign, which was initially launched
in May 2009, helped boost these revenues in 2011.
Parcel Services
Parcel Services which included Parcel Select revenue of $1,341 million, Parcel Returns revenue of $115 million, and
Market-Dominant Standard Mail Parcels revenue of $285 million, totaled $1,741 million for 2012. This was an increase of
$372 million, or 27.2%, compared to the same period of the prior year. These services showed strong volume growth of
15.5%, in 2012, but they represent one of our lowest priced services. As a result, they provide a relatively lower level of
profitability than many of our other services.
In 2011, Parcel Services, which included Parcel Select of $626 million, Parcel Returns of $92 million, plus the Market-
Dominant Standard Mail Parcels of $651 million totaled $1,369 million, an increase of $198 million, or 16.9%, compared to
2010. In 2011, volume on these services grew by 136 million pieces or 13.9%.
Package Services
Package Services revenue of $1,589 million increased $8 million, or 0.5%, in 2012, compared to 2011. Volume decreased
30 million pieces, or 4.4%.
Package Services revenue of $1,581 million increased $50 million, or 3.3%, in 2011, as compared to 2010. Volume
increased 18 million pieces, or 2.7%. The decrease is attributed to customers moving to similarly priced services with
expedited shipping times such as Priority Mail.
Because all services in this category are classified as Market-Dominant, prices for these services are capped.
First-Class Package Services
First-Class Package Services, which include the competitively priced First-Class packages and the Market-Dominant
First-Class Mail Parcels generated revenue of $1,524 million for 2012. This was an increase of $240 million, or 18.7%,
from the prior year. Volume increased 67 million pieces, or 10.5%, in 2012 compared to 2011. The First-Class Package
Services category was newly introduced in 2012, and offers commercial customers that deal primarily with lightweight
fulfillment parcels, a competitively priced, reliable option. The First-Class Package Services category as a whole
performed especially well as a result of management’s continued emphasis on package service options. The strong
growth in these services from the prior year reflects the consumer’s response to a product that provides a high level of
service at a reasonable price.
First-Class Package Services in 2011 and 2010 only included the Market-Dominant First-Class Mail Parcels since the
newly created competitively priced First-Class packages were not introduced until 2012. First-Class Mail Parcels