The U.S. Postal Service is ramping up same-day delivery of
everything from bottled water to fresh fish as its new postmaster
general tries to better compete with FedEx, UPS and even
Amazon.com.
In New York City, letter carriers in the early morning hours
load boxes of fresh and frozen seafood from Fulton Fish Market onto
mail trucks and deliver them to local restaurants by 11 a.m. They
collect packages from Internet electronics retailer Newegg Inc. for
fast, local afternoon delivery. They're also doing daily water
delivery to businesses for Nestlé SA in Manhattan and Brooklyn.
Same-day delivery is part of a big push by Megan Brennan, the
new postmaster general, to make the postal service more
competitive.
"Clearly, the consumer demand is such that we all want the
package today," said Ms. Brennan in an interview. "So we're being
responsive to that."
About six months after taking the top job at the
quasigovernmental agency, Ms. Brennan said she's pushing Congress
to green light the shipping of alcoholic beverages. She also wants
to expand grocery delivery and offer more Sunday delivery.
The postal service must grow. Volumes of first-class mail, its
most profitable product, fell 2.2% through the first three quarters
of the year. It has fallen about 20% over the past decade. While
the agency's package business is growing in double digits, it's
still only about a fifth of total revenue. For fiscal 2014, the
agency's revenue was $67.85 billion.
There's "a lot of potential for the organization, particularly
when you look at what I'll call the hyper growth in e-commerce,"
Ms. Brennan said.
The change in direction is causing the agency some growing
pains, which were evident in its third-quarter results released
last week. While shipping and package revenue rose 10.6% to $3.56
billion compared with a year ago, overall labor costs also
rose.
Work hours increased by about five million hours for the
quarter, and compensation grew about 2.4% to $8.8 billion. USPS
Chief Financial Officer Joe Corbett said last week that the extra
time it takes to deliver packages contributed to the expense.
Also, the Postal Service will delay until 2016 some of the 82
mail sorting plant closings that had been planned for this year
because of service disruptions, which were caused in part by
changes to thousands of employee schedules related to plant
consolidation, as well as harsh winter weather. The delay was so
service levels could be restored, Ms. Brennan said.
Lately, the agency has been on a tear. After launching grocery
delivery with Amazon.com Inc. a year ago in San Francisco, the
Postal Service has added six more delivery markets this year. It
began testing same-day delivery in New York this past November.
It's also shopping for 180,000 new trucks that are better designed
to hold packages.
The Postal Service cut certain Priority Mail package prices last
year by as much as 58% for its largest customers to attract more
business. In addition, for an average of about $1.70, according to
its financial filings, it will take a parcel from post office to
residence for big shippers like United Parcel Service Inc., FedEx
Corp. and Amazon, who are willing to sort the packages
themselves.
Keith Byrd, co-founder of shipping consultancy Transportation
Impact LLC, says more of his customers have either considered or
have shifted parts of their package volume to the Postal Service in
recent months. "Absolutely [the postal service is] taking market
share from the small parcel carriers, especially on the
lighter-weight e-commerce," he added.
Both FedEx and UPS have filed complaints in the past to the
postal regulator, arguing that the Postal Service doesn't charge
enough for some of its parcels. "UPS supports a healthy and viable
Postal Service, but we believe that the USPS, like any other
business, needs to understand the true costs for offering and
expanding competitive services," a UPS spokeswoman said. FedEx said
it can't speculate on specific pricing decisions of other
carriers.
By law, the Postal Service is mandated to charge the cost of
delivering a package, plus at least 5.5%. Ms. Brennan says that
Postal Service packages are priced properly, but she's considering
raising rates—simply because the demand is there. She said that
it's important to ensure the Postal Service is generating more
robust profit on top of revenue.
Ms. Brennan would also like to expand what the Postal Service is
allowed to deliver. One of her first legislative pushes will be to
gain congressional approval for shipping alcohol, she said.
"Clearly, there are some who would like to see us stay in our lane
if you will, but we obviously think there is opportunity for us to
expand," she said.
Last month, three bills were introduced in Congress, two in the
House and one in the Senate, all with the aim of lifting the
Prohibition-era ban on the Postal Service shipping alcohol. One of
the legislators said the move could provide the Postal Service with
an additional $50 million annually.
Ms. Brennan said she also hopes to make progress on introducing
a bill to remove a congressional requirement that the agency must
pay its retiree health-care benefits ahead of schedule, to the tune
of more than $5 billion annually. The payment continually pushes
the agency into the red.
Without that payment and workers' compensation items, the Postal
Service said it would have recorded a profit of $1.4 billion last
year. It doesn't receive direct taxpayer subsidies, but it reached
its $15 billion credit limit with the Treasury Department in 2012
and also receives compensation for some services including mail for
the blind.
Write to Laura Stevens at laura.stevens@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
August 18, 2015 07:15 ET (11:15 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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