The US Postal Service announced its plan to end Saturday
delivery of first class mail in August 2013. While this should not have come to
a surprise as the Postmaster General has been advocating this plan for over a
year now, the American Postal Workers Union president announced his opposition
saying a solution must come from Congress. Some lawmakers also appeared to have
been a bit surprised as one Senator noted that the Postal Service should have
allowed Congress more time to find a legislative solution. Sadly, the US Postal
Service is running out of options as it lost almost $16bn during its last
fiscal year as well as defaulted on Congress-mandated pension payments. Waiting
for Congress to act will surely result in bankruptcy for the US Postal Service,
which, by the way, does not accept tax dollars to operate.
Under the plan, post office hours will not change and post
office boxes will continue to receive Saturday delivery. Although there will be
no first class mail delivery, there will be parcel delivery. The Post Office is
banking on ecommerce growth and parcels to bring the beleaguered group back
into the black.
Volume growth of parcels has indeed grown over the past 3
years at 14.6% while First Class Mail has declined 11.5% for the same period.
Revenue-wise, parcels have seen over a 14% increase over the past three years
and in 2012, it represented 18% of total revenue. However, parcel’s
contribution to total revenue has increased only 3% from 2010 - it has a long
way to go to becoming a major competitive threat against UPS, FedEx and the
regional parcel providers.
Still, Saturday parcel delivery would be a competitive
advantage for the US Postal Service. FedEx and UPS also deliver on Saturdays
but at a higher price in many cases. Plus, its relationship with UPS’ and
FedEx’s SurePost and SmartPost have been and will likely continue to be
financially beneficial for each of the providers. But it does make one wonder
if and how the relationships between the three will change based on the US
Postal Services emphasis on ecommerce and parcels.
Postmaster General Donahoe answered his critics to this
controversial plan by saying, “America’s mailing habits are changing. This
makes common sense.” True but it will be a long road for the US Postal Service.