Can the Package Business Save the U.S. Postal Service?

Feb 19 2014, 12:28pm CST | by

Billions of dollars in the red, the U.S. Postal Service is looking to the package business to make up for a steep decline in revenues from First-Class Mail.

The Postal Service lost $5 billion in the fiscal year ending Sept. 30, 2013, its seventh straight year of losses. First-Class Mail volume, its most profitable product, plummeted by 2.8 billion pieces.

Now the Postal Service is hoping to reverse the trend, in part by stepping up the battle with parcel giants UPS and FedEx.

Package volume was up 8 percent in fiscal 2013, to 210 million pieces. The agency’s Shipping and Package Services currently generate $12.5 billion in revenues, around 19 percent of its total.

The internet might be killing First-Class letters, but it has been a boon to parcels. Two years ago, the Postal Service made a conscious decision to ramp up efforts in that area. “We saw a tremendous shift in consumer behavior to e-commerce,” said chief marketing and sales officer Nagisa Manabe.

“We’re trying to simplify our product and sharpen our pricing to be competitive,” Manabe said. At the same time, the Postal Service is talking to customers around the country in an effort to customize its offering.

The 2013 holiday shopping season was an opportunity to pick up new business. Both UPS and FedEx were criticized for failing to meet some delivery targets in the final days before Christmas. One reason for the service lapse was unrealistic promises by online sellers. Another was severe winter weather. Still, the sheer volume of parcels moving in those few crucial weeks appeared to take the big carriers by surprise.

The Postal Service wasn’t immune. “I would be doing the operations team a great disservice if I didn’t say there were many challenges during the holiday,” said Manabe.

At the same time, she claimed that Postal Service employees “performed beautifully” during the peak. She called the decision to deliver every Sunday in December “a huge deal.”

Targeting the huge post-holiday returns business, the Postal Service pushed its flat-rate service for boxes moving by Priority Mail. In a bid to match the service features of UPS and FedEx, it added free insurance, day-specific delivery and free tracking to the Priority Mail offering.

It was rewarded with a record number of packages during the holiday season, and a 19% jump over the same period of 2012. The Postal Service averaged 10 million packages a day, delivering nearly 90 million in the week before Christmas.

This year, it plans to upgrade the entire tracking network, with 75,000 new handheld devices coming into service by late spring. Even with the use of existing devices, it can provide 11 points of scanning over the course of a delivery, Manabe said.

The Postal Service’s biggest marketing leap over the past year has been the introduction of same-day service, dubbed Metro Post, for urban centers. A pilot program launched in San Francisco in early 2013 failed to generate much interest from e-commerce retailers. In December, it was extended to New York City.

Postal Service officials say they have high hopes of capturing the growing market for same-day delivery of items ordered online or through physical stores. But they’ll have to contend with a growing number of nimble rivals, including eBay, Amazon.com and Google – not to mention the more seasoned networks of UPS and FedEx.

As it plays catch-up with those market leaders, the Postal Service continues to suffer from a public perception of being slow and bureaucratic. Manabe claimed the agency’s image is changing rapidly, as it deploys mobile point-of-sale devices which speed up lines and, in some cases, even serve waiting customers in the parking lot.

“This is the flattest, fastest-moving organization that I’ve ever worked for,” Manabe said.

None of the Postal Service’s rivals suffers from being a quasi-public organization that must fund operations entirely from products and services, yet is required to serve every address in the U.S. The agency contends that it’s further hampered by excessive costs for healthcare, workers’ compensation and retirement. At the same time, it lacks the freedom of private-sector rivals to explore creative new offerings.

Debate continues to rage over a proposal to eliminate Saturday mail delivery (although package service apparently would not be affected). Supporters say the move is essential to reining in costs, while critics argue that it would result in the loss of far more revenue than it would save in overhead.

Perhaps the agency’s biggest immediate challenge is the Postal Reform Act of 2013. Introduced as S. 1486 and H.R.  2478, the proposed legislation would permit the phase-out of Saturday mail delivery, raise workers’ health and life insurance premiums, and possibly eliminate “to-the-door” service in certain rural areas. It would also require the Postmaster General to submit to the Board of Governors a plan for “long-term solvency.” Union leaders are adamantly opposed to the measure.

Meanwhile, the Postal Service continues to vie with private-sector rivals, especially for commercial business. “We want our customers to help us to innovate, to come up with new ways that we can improve the package-delivery market,” said Manabe.

Source: Forbes Business

 
 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

The Other Important Number In The President's Obamacare Briefing: 24
President Obama was triumphant on Thursday. After facing months of questions over whether the White House would hit its goal of 7 million Obamacare sign-ups, the president had the latest enrollment data in hand—and it...
 
 
It's Good to Be King: LeBron James Tops 2014 Top-Selling NBA Jerseys
We haven’t crowned a winner for the 2014 NBA Championship, but we know who the king is when it comes to jersey sales. For the sixth time, Miami Heat power-forward LeBron James tops the NBA most-popular jersey list based...
 
 
The L.A. Clipper Miracle... Next: Democracy Will Break Out in Russia?
The Lakers are dead as Moses. The Clippers, who finished 11 games ahead of them last season and 30 in this one, are No. 3 seeds in the NBA’s Western draw, meaning they’ll be favored to stay alive for the next three or...
 
 
12 Reasons Why New Zealand's Economic Bubble Will End In Disaster
New Zealand’s economy has been hailed as one of world’s top safe-haven economies in recent years after it emerged from Global Financial Crisis relatively unscathed. Unfortunately, my research has found that many of...
 
 
 

Latest from the Network

Taylor Momsen loves New York
Taylor Momsen needs "grit" in her life. The Pretty Reckless singer tries to stay out of the limelight by living in New York where she can "hide" and claims she has never really "cared" about mixing with celebrities. She...
Read more on Celebrity Balla
 
Leighton Meester praises Adam Brody
Leighton Meester thinks her new husband Adam Brody is "incredible." The former 'Gossip Girl' star, who tied the knot with the actor in a secret ceremony in February after meeting him on the set of their film 'The...
Read more on Celebrity Balla
 
The Other Important Number In The President's Obamacare Briefing: 24
President Obama was triumphant on Thursday. After facing months of questions over whether the White House would hit its goal of 7 million Obamacare sign-ups, the president had the latest enrollment data in hand—and it...
Read more on Business Balla
 
It's Good to Be King: LeBron James Tops 2014 Top-Selling NBA Jerseys
We haven’t crowned a winner for the 2014 NBA Championship, but we know who the king is when it comes to jersey sales. For the sixth time, Miami Heat power-forward LeBron James tops the NBA most-popular jersey list based...
Read more on Business Balla
 
The L.A. Clipper Miracle... Next: Democracy Will Break Out in Russia?
The Lakers are dead as Moses. The Clippers, who finished 11 games ahead of them last season and 30 in this one, are No. 3 seeds in the NBA’s Western draw, meaning they’ll be favored to stay alive for the next three or...
Read more on Business Balla
 
12 Reasons Why New Zealand's Economic Bubble Will End In Disaster
New Zealand’s economy has been hailed as one of world’s top safe-haven economies in recent years after it emerged from Global Financial Crisis relatively unscathed. Unfortunately, my research has found that many of...
Read more on Business Balla
 
Britney Spears' dad wants her to stay single
Britney Spears' father reportedly doesn't want her to get married again. The 'Perfume' hitmaker, who broke of her engagement to her former agent, Jason Trawick, in January 2013, is desperate to tie the knot with her...
Read more on Celebrity Balla
 
The Singular Secret For A Leader's Success: Self-Awareness
The National Advisory Council of a prestigious west coast business school was asked what single quality they thought would be most valuable for their graduates to acquire as they graduated.  The answer was self-...
Read more on Business Balla
 
Toby Keith's I Love This Bar & Grill Hit With Tax Warrant
In 2003, country singer Toby Keith went all the way to #1 with his mega-hit, “I Love This Bar.” The incredible popularity of the song inspired a chain of restaurants called Toby Keith’s I Love This Bar & Grill with...
Read more on Business Balla
 
What If Doctors Could Finally Prescribe Behavior Change?
This guest article is by Sean Duffy, CEO and Co-Founder, Omada Health Three out of four Americans will die of a disease that could be avoided—if only they could re-route their unhealthy habits. A new category of...
Read more on Business Balla
 
 
Auto Balla Sexy Balla Sport Balla TV Balla Politics Balla Movie Balla Apple Balla Business Balla Ad Balla Celebrity Balla