The Office of Inspector General at the U.S. Postal Service has concluded that the USPS is not threatened by the rise of same-day delivery, determining it is a niche, costly model appealing mostly to urban millennials that only represented 2% of all parcel deliveries in 2018.
The IG report also recommended the USPS continue to focus on next-day delivery through products like Parcel Select. The DDU induction service is utilized by UPS and FedEx for last-mile delivery, although both major carriers have been diverting volume to their own networks.
“If same-day delivery grows at or above the current rapid pace (up to 50% annually), it could disrupt last-mile delivery as we know it,” the IG report stated. “This could have tremendous implications for the U.S. Postal Service and other traditional carriers. Yet, same-day delivery’s current volumes do not appear to be a significant threat to the Postal Service’s own parcels volume at this time.”
In the report, the IG concluded that same-day delivery has limited appeal. “Beyond
a core of enthused urban Millennials, many consumers are unwilling to pay for same-day delivery at any price,” the report stated. “If they are interested at all, it is mostly for urgent needs like medications or groceries. The business model used by some major same-day delivery providers may be unsustainable because it loses money with each delivery.”
The IG hired market research firm Colography to determine the size and opportunity in the same-day delivery market. Colography found 249 million packages were delivered same day in 2018., with 91% or 227 million parcels made up of merchandise and 9% or 22 million being groceries.
“The small number of same-day grocery deliveries reflects the fact that online grocery shopping is still not widespread in the United States: it represents less than 4% of the total U.S. grocery market by some estimates,” the IG found in its report, citing Business Insider. “The same-day B2C market has grown by a very healthy 50 percent a year between 2016 and 2018 … (but) did not exceed 2% of total U.S. domestic air and ground volumes (in 2018).”
Based on a July 2018 survey of 1,539 consumers commissioned by the IG, just 9% of rural customers had opted for same-day delivery that year, compared to 29% of urban customers. This is hardly surprising, given the model doesn’t work outside of densely populated urban or suburban settings.
Not surprisingly, the faster delivery option skewed younger, with millennials’ same-day deliveries as a percentage of total deliveries almost twice that of baby boomers, 7.7% vs. 4.1%.
According to the IG survey, food and electronic products came most frequently by same-day delivery in 2018, cited by 9% of survey respondents, followed by fashion, beauty and personal care (7%), recreational items and household or office goods (6%) and medicine or medical goods (5%).