USPS Package Business Shining Light Amid Record Loss

As the U.S. Postal Service contemplates its record 2012 fiscal year (Oct. 1, 2011 – Sept. 30, 2012) net loss of $15.9 billion — compared to a net loss of $5.1 billion for fiscal year 2011 – and holds out hope for comprehensive postal reform legislation during the lame-duck session of Congress, there is at least one shining light amid its financial morass: its shipping and package business.

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Revenue from the USPS package business increased 8.7%, or $926 million, and reached nearly $12 billion for fiscal year 2012. According to a press release, the USPS packaging business saw a volume increase of 244 million pieces sparked by “higher consumer spending, higher ecommerce retail sales plus increased marketing efforts.”

Postmaster General and CEO Patrick Donahoe said on Thursday during a conference call that the USPS expects a 20% increase in packages delivered during the upcoming holiday season. Donahoe said the USPS has grown its packaging business, in part, through its last-mile delivery service partnering with UPS and FedEx.

“We now have 100% visibility throughout the system and people recognize the value opportunities,” Donahoe said. “We offer value pricing at the counter or discounts for customers in bulk shipping.”
Donahoe said the USPS has improved its package delivery scanning whereby each package is scanned at least eight to 10 times.

The USPS has been more visible through its “If It Fits, It Ships” advertising for is priority mail flat rate shipping boxes targeting the small business market. The USPS also launched Click-N-Ship for Business, designed for small- and medium-size businesses that have 10 to 100 pieces of mail to ship per day.

Starting Nov. 19, the USPS will launch its Metro Post same-day delivery pilot program in San Francisco targeting up to 10 online ecommerce companies and their associated retailers.

Each ecommerce company that wants to participate in the San Francisco market test must have at least physical locations nationally, one or more of which must be within the defined metropolitan area of the market test, according to the filing.

During the initial period of the USPS market test (until January 2013), only 200 packages per day may receive same-day delivery. Packages must be picked up by 2 p.m. and they will be delivered between 4 p.m. and 8 p.m.

Gary Reblin, vice president, domestic products for the USPS, said in an email that another reason the package business has seen significant growth is because lightweight parcels (under one pound) were reclassified from the market-dominant product list to the competitive product list. This classification change means the USPS can be more competitive because it can fast-track rate changes and new product launches without extensive oversight and approval from the Postal Regulatory Commission.

“We have really focused on aligning our products to grow with ecommerce,” Reblin said.

Moving to the competitive product classification for packages up to one pound allows better pricing for large first-class package mailers. “We enhanced our returns portfolio to offer simpler and more convenient returns solutions that make it easier than ever to return products.”

The USPS has also created a new line of regional rate boxes that attract shippers that send packages shorter distances. “We grew our flat rate products by adding the padded envelope and continued to advertise about the ease of use and simplicity of the product,” Reblin said. “We worked with partners to grow our parcel select partnerships. And we continued to upgrade technology to provide customers with more tracking and visibility than ever.”

Jim Tierney ([email protected]) is a senior writer for Multichannel Merchant. You can connect with him on Twitter (TierneyMCM) and LinkedIn, or call him at 203-358-4265.