Sunday, May 13, 2012

Missed Opportunities as USPS reports another quarterly loss – again

The beleaguered United States Postal Service (USPS) reported another quarterly loss - $3.2bn for the first three months of this year. Yes, this does sound like a broken record as the USPS continues to bleed.

Mail volume continues to decline as the agency grapples with the need to update its supply chain in order to be competitive. Sadly it is still stuck in the mid-20th century and appears it will remain there. The USPS has introduced a five year plan to Congress but unfortunately this is an election year and for many congressmen, seriously taking up this legislation could result in negative backlash from not only constituents but also from labor unions especially if congressmen vote for the requested post office closings, layoffs and changes in compensation.

The USPS has steadily been losing more and more market share to the likes of UPS and FedEx, the two largest providers of small parcel delivery in the US. Even though both UPS and FedEx rely on the USPS for final mile delivery for some of their services such as SmartPost and SurePost, this is not enough to sustain the agency.

Opportunities are being missed such as the explosive growth of ecommerce. Yes, both FedEx’s SmartPost and UPS’ SurePost targets this growing demand, however, the USPS needs to take advantage of this growth opportunity, promote its solutions and perhaps offer a specialized solution to rival those of FedEx and UPS – one in which would keep the package in one network instead of one that travels through a UPS or FedEx network and then is placed in the USPS network for final mile - thus easier to track and monitor.

There does seem to be some USPS solutions for the ecommerce space such as web tools for integration into websites. Its’ flat rate boxes are also promoted as another solution. These are not enough and the possibility of ending Saturday delivery and the recent announcement of ending international delivery of lithium batteries will further hurt the agency.

Saturday delivery could be a competitive advantage for the USPS, particularly for ecommerce deliveries. Currently, UPS and FedEx weekend deliveries are an additional charge. Consumers that order online are typically an impatient group and expect their packages to arrive within a two day delivery period on average, particularly if they have to pay for shipping or if they take advantage of special services such as’s Prime membership.

This past week, the USPS announced they would suspend international shipments of lithium batteries (this includes all overseas military bases). This will affect smartphones, laptops, cell phones and tablets. Transportation of lithium batteries on air cargo carriers has been debated over the years due to the instable nature of the battery. While caution is admirable, UPS and FedEx continue to transport these batteries and electronic goods. Much of ecommerce is centered on such electronic goods. UPSPS stated it would lift the ban in 2013 when regulations are implemented. By then it will probably be too late for the agency. UPS and FedEx will gain additional shipments as a result of this ban.

To the US Congress – allow the USPS to implement its 5 year plan (but keep Saturday delivery). Although not perfect by a long shot, it is one in which will help keep the USPS afloat a while longer and offer another option for those shippers looking for an alternative to UPS and FedEx.