Profiles in E-commerce
A interview series with leaders in the online retail industry.

With over 5.2 billion packages delivered to 156 million addresses in the U.S. last year, the Postal Service is the undisputed market leader in e-commerce delivery. The National Retail Federation expects e-commerce sales to grow by 8% to 12% annually over the next three years. To keep pace with this tremendous growth, the Postal Service seeks to invest heavily in its network and infrastructure while continuing to introduce new products to maintain its leadership in the parcel delivery market. recently spoke with Jim Cochrane, Chief Customer and Marketing Officer and Executive Vice President at the U.S. Postal Service, to get his insights on the strategies the Postal Service is using to grow package revenue. (Transcript of interview listed below.)

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Transcript of Jim Cochrane Interview Hello everyone.  Thank you for joining us for Profiles in E-commerce, our interview series with leaders in the online retail industry.  My name is Eric Nash.  I will be your host for today, and our topic will be e-commerce parcel delivery, and specifically how the U.S. Postal Service is competing in this dynamic market.

Over the past five years the Postal Service has experienced strong growth in its package business.  And looking at the most recent years, the Postal Service’s growth has outpaced the growth of its competitors, particularly in the key battleground of e-commerce.  For example, in 2016, the Postal Service’s domestic mailing and package revenue was up 16%, while FedEx and UPS were up only 10% and 4% respectively during that same period.

Today we are really excited to talk to Jim Cochrane, the Chief Customer and Marketing Sales Officer of the Postal Service.  Jim will be sharing some insights into what has driven the Postal Service’s success in growing their package business.  In his current role as Chief Customer and Marketing Sales Officer, Jim Cochrane reports to the Postmaster General.  And he oversees all domestic and international product marketing, development, management and product innovation.  He is also responsible for the Postal Service’s sales and customer relations areas.

Jim has worked for the Postal Service for 41 years, and he has had many roles including Vice President of Product Information, Vice President of Product Visibility and Operational Performance, and most recently Chief Information Officer.  Jim, thank you so much for joining us and congratulations on the amazing success of the Postal Service.

Jim Cochrane: It is my pleasure, and thank you. Alright.  So let us get right into the questions.  A big driver of your recent success has been in e-commerce, where you have become the market leader delivering more e-commerce packages than any other deliver company.  What has allowed the Postal Service to achieve success in this area?

Jim Cochrane: I think it is the capabilities that we have.  We will travel four million miles today and we will go to 155 million addresses, and we do that six days a week.  And it allows us to have a unique relationship, in particular with consumers, as we are at their door or in their mailbox or on their porch six days a week.  So you leverage that and your asset is an important part of the postal service.  We are a delivery company.  And it is the reason why even traditional competitors like UPS and FedEx give us hundreds of millions of packages to deliver for them.  Because it is a better solution for customers.

And then, of course, we have great partners.  But you have to deliver world-class service.  It has to be reliable.  You have to have excellent tracking and information and visibility.  And once again, I think that combination of our capabilities, the infrastructure that we have, combined with our execution, has let us rise to the top. You oversee product innovation at the Postal Service and you have been very active in this area in the last few years.  You have introduced quite a few new and exciting products, along with enhancing existing products in order to help shippers save money and be more efficient.  What have been some of your bigger successes?

Jim Cochrane: I think the Flat Rate Boxes and Envelopes that we launched over a period of time – probably in the last ten years – have really served us well.  It takes the mystery out of shipping.  ‘If it fits it ships’ was the tagline years ago and I think that has been very helpful for us.  Gary Reblin, our Product Innovation Vice President, introduced Cubic Pricing which allowed us to recognize packaging that is done in a very efficient way.  If it is a little heavy yet it is within a certain size, customers are able to ship at a lower cost.  I think a lot of the innovation that we have done is also operational innovation.  We had to improve our capabilities for everything, from our tracking system to parcel sorters that we deployed in our processing centers, to technology in all of our post offices to help us execute in the most efficient way possible and continue to have the lowest prices in the marketplace. That is great.  Well, you mentioned it has been over a period of time with the Priority Mail Flat Rate products.  Do you expect the pace of innovation to continue here?  Are there any new products on the horizon that you could share with us?

Jim Cochrane: One of the things we have done is we have realized how society and customers have become more mobile in how they consume information.  We are in the process of launching our Informed Delivery program and app.  And you can go to our portal.  But it allows you to manage the mail and all the packages coming at you on a daily basis.  You launch the Informed Delivery app on your phone.  It is available with iOS and Google.  And what it does, is it gives you all the packages that are going to be delivered to you that day, as well as the mail pieces.  And that is the newest piece, adding visibility to mail pieces so you can begin the buying experience.  So I think that as an organization, we are trying to do everything in our power to improve the customer experience to both mailing and shipping.  So stay tuned.  We are not done there but there are some really exciting things going on, which I think will really improve the buying experience and the delivery experience. Yeah, as a current Informed Delivery user, I can tell you that it is a really great product.  And I have been really excited to use it, because now I am able to log in.  I am using it via email.  And I can see what mail is coming to my inbox for the day.  So it is a great opportunity.

Jim Cochrane: You should get the app.  The app gives you both mail and packages in the same place. Back in 2006 the Postal Service was, for the first time, allowed to offer custom negotiated rates to different customers via negotiated service agreements, or more commonly referred to as NSAs.  How important has the price flexibility, afforded by these NSAs, been to your success?

Jim Cochrane: We were in a period – I was running the Shipping business for us from a product perspective back in 2001 through 2006.  So previous to the law change, I had to give the same price to a consumer as I did to Amazon or Home Shoppers Network or JC Penney.  That did not make any sense.  It did not allow us to compete with the commercial players.  So, NSAs give us the ability to do negotiated service agreements.  Once again, the regulator scrutinizes them and makes sure that there is no cross-subsidization and that our packages are in fact covering their costs.  So I cannot write any NSAs that are below cost.  But it allows us to compete better for the larger shippers, and really customize a solution that looks at everything from the size of the packaging, the amount of the volume, where the packages are going to.  So all that matters, and once again the key issue is to grow with our customers.  We try to recognize their growth as they ship more with us.  There is a reward for that, I will say.  So it is really helpful for us and it has been a really nice addition to our portfolio. With what you just said, where you are both growing with the customer, is the main concept of the NSAs to use these discounts to win new business or foster existing business and helping it grow?

Jim Cochrane: It is all the above, right?  We definitely want to go after new business, and that is where our success has been the last five years.   Cliff Rucker and the sales team have been out there very aggressively trying to understand customers’ issues and provide solutions that are competitive in the marketplace.  So because we do not have things like surcharges, residential surcharges, extended area surcharges and rural surcharges, there is a nice ability to craft a solution that can save a shipper money.  So pretty successful for us using NSAs to attract new clients, and at the same time, using NSAs to keep existing business.  It is very competitive out there.  And once again we have world-class customers that we compete with and partner with, in DHL and UPS and FedEx.  But I think customers win on this; at the end of the day, the ability to provide NSAs to keep the cost of shipping, in particular free shipping, it helps people manage their spend a little bit better if the market place is competitive.  And then we are all competing rigorously for customers’ business.  And that is the reality of the marketplace we compete in. Talking about surcharges, that’s a great segue here into our next question.  Looking at your competitors, their product pricing includes significant hidden costs, such as fuel surcharges and residential delivery surcharges.  And UPS recently announced that they’ll be adding a peak season surcharge for deliveries during the holidays.  The Postal Service has always taken a straightforward approach with no hidden costs and no surcharges.  How has this more straightforward approach contributed to your success in the market?

Jim Cochrane: Well, for us, as I established earlier, we go everywhere every day.  And so we are very different in how we do delivery from our competitors.  So I understand why they have residential surcharges; it is a different cost than a business delivery.  And I understand why rural delivery is a little more challenging than urban delivery.  But for us, we are going to go four million miles today and we are going to go by every house today.  So our ability to stop takes away the fact that we need to be maybe less dependent on trying to cover that added cost.  We cover the cost, but as we are going there, filling the truck up becomes the challenge.

So it worked well for us.  It cuts through the clutter.  It is still a mystery; a lot of customers do not realize until they get their bill at the end of the month that their discount is not always what they think it is.  But once again it is becoming very competitive.  It is a common practice, in some cases, for our competitors to discount some of those surcharges.  But once again, customers have to really understand what they are really paying.  And that is one of the things we message, as we are out talking to customers and crafting solutions for them.  And we sell against it and it works to our advantage. Five years ago the Postal Service had a reputation for lower tracking accuracy compared to the other carriers.  But we have seen package tracking improve dramatically at the Postal Service to the point that we now view you as the leader in tracking.  I know you were the Chief Information Officer at the Postal Service and that you led the charge for many of these improvements in tracking.  How were you able to engineer such a dramatic change to package tracking, and are there any additional things you are working on in this area?

Jim Cochrane: Once again, we had to make a capital investment.  And it was a customer‑facing system.  It was a fact that we had a lot of the same events; we did not have them as timely as we needed to.  Our devices that we were using would store the delivery events all day until we get back to the Post Office.  So we had to replace our product tracking system and modernize it and put it into a more robust solution.  And then we replaced all the scanners.  Now, for us to replace all the devices – you have an intelligent mail device that we use out on the street, it is all real-time information.  If we do a scan, when we built the tracking system and we deployed the new scanners, our challenge was to post within a minute.  So if I do a scan, I want to see somebody getting a text a minute later.  And that call to action created a real significant re-architecture of both our technology and the devices that we use.  It was an investment in the future, it was an investment in our customer‑facing systems, and really an investment in customer experience.  It allowed for a much stronger customer experience but it also leveled the playing field because we now think we have tracking that is every bit as robust as everyone else.  We are not done; we are moving towards predicting delivery.  Doing a lot of testing right now; the layering, the geofencing that we have done on all the addresses.  And really want to get to a point that we can tell every customer within a two-hour period when their packages are going to be delivered.

That is an enhancement that is being tested right now, and, of course, the ability to track where your package is, map style.  It is kind of the Uber of how people want to consume information.  Everyone is really getting comfortable with geospatial information.  So we are also testing that off. Yeah, that would be really great.  Everybody would be so excited, I think, to see their package on its way and literally see where it is going to or how far away it is from your house.  That sounds great.

For online retailers, returns are a significant friction point in e-commerce.  How does the Postal Service compete in this area and can you share with us any future programs you are working on?

Jim Cochrane: Sure.  It is one of those challenges that as e-commerce grows, returns grow also.  And especially as people more and more move to the apparel sectors, they do tend to have a higher return rate than electronics or music and things of that nature.  So as apparel online grows, returns grow.  And so what we bring to the table is really a ubiquitous retail presence.  One of the things we discovered early on in this is customers, even though we provide free pickup on packages at the house, there is just some anxiety on the customer’s part, even though they come home to packages on their porch every day, to go to work and leave a package on the porch.  So your ability to hand that off to someone becomes an important part.  The industry term is “trunk time”; they will put it in their trunk and drive around for a week because it is not convenient to maybe hand it off to one of our competitors.  We have over 31,000 Post Offices, so everyone knows where their Post Office is.  It is conveniently located and more often we are allowing 24/7 access.  And we are looking at the ability for someone to walk in after hours and have access to a device that scans their package and also opens up the drum so they can deposit the package.  So under a certain weight and size you can put it in one of our convenient mailboxes.  If you are comfortable, you can schedule a carrier to pick it up during their normal rounds for free.  And, of course, you have the access to all the Post Offices.  So once again, there is still a technology piece to this to continue to make it easier.  And we are working on other opportunities to expand so people have 24/7 access to return packages.  It is a point of friction and it is not as mature as the rest of the shipping business.  I have seen customers that I think do a great job on the outbound, but returns are a place that people still probably need to put a little focus.  I think it is a cost center in some ways, and you need to make sure you are doing everything, just like you would with an outbound package, to drive the cost out of your inbound and returns. I was just at an event last week and the USPS reps demonstrated “Automated Package Drop” at some of the Post Offices.  And it was an e-commerce event.  Everybody really was excited about that and I could see returns really playing right into that.

Jim Cochrane: You have to make it easy, and I think you used the term ‘frictionless.’  And that is the challenge.  We are trying to be frictionless on returns and provide a solution that is world class, just like the outbound solutions we provide.  In 2009, the Postal Service began a program that it calls “resellers.”  What does that term mean and how does the Postal Service view the reseller program and its role in growing postal package revenue?

Jim Cochrane: Resellers are a fact of American commerce.  If you think about it – we are in the middle of summer here and it is pretty hot on the East Coast, and I am pretty sure it is everywhere around the country.  So if your air conditioning breaks you are going to call someone who tends to be a local player.  And they are resellers for a big manufacturer, Carrier or somebody.  Whether it is cars or software or appliance, you can go on and on.  It is how business gets done in the United States.  And for us, we had a focus on large customers but we did not have a focus on small and medium-sized business, and we were not resourced against them.  So we thought resellers were an excellent opportunity to bring our brands and our shipping solutions down-market to smaller volume shippers.  When they have 100,000 or a 250,000 square foot warehouse and they are a big player in e-commerce, we know they are there and everybody knows they are there.  But when they are only shipping five, ten packages a day, how do you find those customers?  And that is where resellers have been a very effective addition to the Postal Service portfolio.

Now on the mail side that is common fact.  We have great business partners.  The printers in the United States, the Quad/Graphics, and the Randalls and the Harte Hanks and Donnelleys are all strong players in the print business.  And we work closely with those business partners to provide the best solution to somebody that wants to do a mail campaign or present bills or [inaudible] of the world.  Once again, partnering with companies like that, it brings the best solutions to customers.  And we looked at resellers and things like PC Postage providers, like and Pitney and Endicia, as excellent partners on bringing the best solution to customers. Looking backward a little bit, to what extent has the reseller program contributed to past growth and helped the Postal Service become the leader in e-commerce packages?

Jim Cochrane: Once again, it is niche, right?  It goes after mostly small/medium-sized business.  It gave us solutions there and that is a growth engine in the economy.  And if you think about the early days of resellers, it was mostly marketplace activity, eBay and Amazon in the marketplaces.  And providing the solution there was really important for us.  So it certainly contributed to the success that we are experiencing.  And once again, we have grown this.  I think last year we did about $7 billion in the channel which is coming out of PC Postage and resellers.  So together, those solutions have really crafted a nice segment solution for us for the small, medium-sized business. With that do you see the reseller program continuing to be a growth strategy for the future?

Jim Cochrane: Well, if it is growing to the tune that ours is, and it gives us solutions down market where we do not have the sales team to interact, yes, I do not see a reason why it would not continue to serve both customers and the needs of the Postal Service, going forward. You’ve mentioned a few times that the parcel delivery market is so competitive.  And we see that all across the board in how the carriers are marketing their services.  With the reseller program, is that helping you keep existing business, now that everybody is going after each market?  UPS, FedEx, all the competition is going after small businesses now as well.  So is the reseller program helping you keep existing business, or is it focused more on going after new business?

Jim Cochrane: I think it is both.  If you have people who are shipping through that channel, it works for us.  If they are not shipping with us, going after some of that business also works for us.  So it is both.  Once again we have to continue to serve customers and find new customers and enhance the value that we bring to customers.  It is all part of that same equation. and its subsidiary Endicia have had an 18-year business partnership with the Postal Service.  How important are partners like and Endicia and other PC Postage vendors to the Postal Service?   And how have these partnerships helped grow package revenue?

Jim Cochrane: I think the best solution is – way back when, when getting a shipping system was an important issue, if you remember those days.  And they still go on.  Our competitors were out there providing built-in shipping systems as part of the contractual relationship.  And we did not have that and we did not want to go down that path.  So the integration into a WMS system, the integration into somebody’s business, into their warehouse management system, is a challenge.  And it is a constantly evolving challenge.  So using partners like Endicia and  Now we have EasyPost, [inaudible], NeoPost.  All these world-class brands are working to provide solutions from a software platform, and more importantly the data integration, the software integration that has to be done.  For that to do that for us was an important part of our strategy and it has worked well for us over the years. And as a final question, can you share any strategies that you and the executive team at the Postal Service have for future growth?

Jim Cochrane: I think I said earlier, it is highly competitive marketplace.  We deliver for business partners like Amazon, and UPS and FedEx, and once again every day we compete for that business.  So if I had to focus our strategy, it is just a laser focus on keeping our costs down so we can stay competitive on price; laser focus on execution that we are delivering the best service in the marketplace.  And finally, just doing everything in our power to improve the end-customer experience.  And with that interaction, we have our ads that we run right now, ‘your business is our business.’  We take that very seriously.  We represent a shipper’s brands on the porch, in the mailbox, at the front door.  And we do that in a very professional way.  So the focus is on continuing to improve the customer experience, whether it is mobile solutions and apps.  Or just continue to let the customer customize how they want things delivered, I think is where we are going to continue to see evolutions on this.  So again, food takes a different type of delivery than a package that has a sweater in it.  So once again, I think you will see more customization from the Postal Service because we have to keep up with the changing needs of customers. Jim, thank you for joining us today and we wish you and the Postal Service continued success with the amazing growth you have generated.

Jim Cochrane: I appreciate that.  Thanks for the opportunity to spend some time with you.  It is an interesting market space.  If you are in e-commerce, it is an interesting space and it continues to evolve.  We have to make sure we are evolving with it.

See Jim Cochrane’s bio.

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