Many online retailers depend on the U.S. Postal Service (USPS) to reliably deliver merchandise to customers, since the service is often less expensive than UPS (United Parcel Service) and delivers six days a week, something that UPS charges a significant premium for.
But the USPS lost $2.8 billion last fiscal year. And, for the fiscal first quarter that ended on December 31, 2008, USPS reported a massive $384 million dollar loss—potentially putting the Postal Service on track for yet another multi-billion dollar loss over the next fiscal year.
“We are taking bold steps to cut costs immediately. At the same time, we are examining, realigning and streamlining our business to address longer-term financial pressures while continuing to provide high levels of service to the America public,” said Postmaster General John Potter in testimony to the Postal Service governors.
"First, it is possible that the cost of six-day delivery may simply prove to be unaffordable" Potter continued. "If that should occur, it could become necessary to temporarily reduce mail delivery to only five days a week. We would do this by suspending delivery on the lightest volume days. Toward this end, I reluctantly request that Congress remove the annual appropriation bill rider, first added in 1983, that requires the Postal Service to deliver mail six days each week."
While congress must still act on Potter's request, a reduced USPS delivery schedule would not be good news for ecommerce merchants, especially since, as Potter put it, "The Postal Service is a vital economic engine in our national economy."
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This article is filed under Inventory & Shipping and has the following keyword tags: USPS, mail delivery, UPS, shipping.
2 Comments
Shipwire eCommerce Order Fulfillment Service says:
Shipwire has been watching this with a lot of interest and we were getting comments on our Blog as well. When I was doing some research for our blog post, a few points came up that I think worth mentioning.
Some analysts are saying the USPS would save millions on gas alone; but, that was really a big justification when gas prices were soaring this summer. Less so today; but, gas prices fluctuate pretty quick these days.
in 1980 there was an analysis that the USPS would save $1B cutting Sat delivery ($2.5 B in inflation adjusted dollars).
When I was looking at this for the Shipwire blog a lot of the background chatter seemed to be more focused on the USPS's pension fund, recently restructured at the top of the market, being a MASSIVE liability on the balance sheets that the current economy is leaving seriously underfunded. It is hard to save your way out of a hole in the Pension plan. We may want to keep an eye out for them to restructure that with workers; but, it will take time for sure. Might this move, be step one to bargain with the employees? If so, interesting move.
My other thought is that Saturday delivery is a real competitive differences that the USPS has. There is a reason that FedEx and UPS charge more for residential verse commercial delivery; it is hard to reach recipients at home, it cost more and there are a lot more delivery attempts going to a home that is getting smaller package volume per drop. The USPS making Sat deliveries helps people get residential packages when they are home. Without this they may not be as competitive and we'll start to see a lot more online buyers delivering to business during the week where UPS and FedEx are more competitive.
Might they explore some options rather than a wholesale chop of Sat Delivery to help them innovate their way out of this budget hole? Maybe trialing a cut of Sat delivery in a couple markets and make a push for longer Saturday Post Office hours to make pickup easier. If somebody has to pick it up, maybe cross-promote another product when they come to the post office. "Sorry it was a hassle for you come to the office on Sat rather than getting this on your doorstep..here are 3-5 stamps."
Necessity is the mother of innovation.
Nate Gilmore
Shipwire ecommerce order fulfillment
Warehouses in the U.S., Canada and the UK
Store-Sell-Ship(tm)
www.shipwire.com/trial
Audio51 says:
Why is Saturday automatically the day that would be dropped. That would mean if you didn't get what you were waiting for by Friday, you would have to wait 3 days for the next shot at delivery. Why not suspend delivery for, say....Wednesday? Then the longest recipients would have to go without the ability to get deliveries would 2 days.
