Facing a slump in the mail it had been delivering since the days of America's Revolutionary War, in 2012 the US Postal Service began aggressively targeting e-commerce and lapsed customers as the way to salvage its declining business.
"Really it started almost at the level of cold-calling, talking to people who really hadn't spoken to us in a long time," said Nagisa Manabe, who joined the USPS in May 2012 as chief marketing and sales officer from Coca-Cola Co after a career in the private sector. "And really trying to persuade them to consider us as a very viable alternative in the shipping market."
With further drops in its traditional bread-and-butter products ahead, the USPS wants to capitalize on e-commerce, which consulting firm Detroit LLP has predicted should grow 14 percent this holiday season alone. But industry experts question whether the USPS has enough space in its delivery vans and whether its unionized work force can handle a greater proportion of the e-commerce market.
Over the past two years the USPS has rolled out real-time scanning for packages, a vital tool for online retailers and consumers alike to track their packages. It is also upgrading all of its delivery workers' handheld scanners.
The rise of the internet has taken a heavy toll on first-class mail, the USPS's most profitable product. That falling business played a significant role in the USPS's fiscal 2014 loss of $5.5 billion, its eighth consecutive year in the red.
From 2009 to 2013, the volume of first-class mail deliveries dropped more than 20%. In the fiscal year ending September 30, USPS deliveries declined to 155.4 billion pieces from 158.2 billion. First-class deliveries accounted for 2.2 billion pieces of that decline.
But package deliveries rose to more than 4 billion pieces from 3.7 billion, accounting for $1.1 billion of the USPS's revenue growth of $1.9 billion. In the run-up to Christmas, the USPS has been doing Sunday deliveries for Amazon.com Inc
in a number of cities. Manabe adds that the agency will handle the online retailer's push into same-day and next-day deliveries "in many markets."
EBay Inc is another major customer and Manabe says "pretty much anyone who's in the e-commerce space at least does some volume with us."
Fleet overhaul
Many in the delivery industry are waiting to see how the USPS has handled surging e-commerce volumes in the days before Christmas.
The USPS's competitive advantage lies in the fact that it already delivers to every house in America and analysts estimate it can do so for around a quarter of the cost charged by United Parcel Service Inc and FedEx Corp, which are both competitors and customers of the USPS.
"The US Postal Service has the ultimate last-mile delivery network, so it has a real opportunity here," said Vinnie DeAngelis, vice president of postal relations at Neopost USA, which provides tracking and other software for e-commerce retailers and delivery companies.
According to shipment-tracking software developer ShipMatrix Inc, in 2013 the USPS accounted for 59.2% of e-commerce deliveries, while UPS accounted for 31.9% and FedEx 8.9%. The USPS has predicted holiday package volume growth of around 12 percent this year from November 17 to Christmas.
In the years ahead, the USPS expects 80% of US ZIP codes will see "significantly more business," Manabe said. But many of the USPS's current delivery vehicles are more than 25 years old and built for mail instead of larger packages.
"They (the USPS) tend to operate smaller vehicles that really cube out (fill up) pretty quickly as opposed to the network we have in place," FedEx Executive Vice President Michael Glenn said during a December 17 earnings conference call with analysts. Delivery companies measure their vehicles' three-dimensional space in cubes.
The USPS plans to spend more than $10 billion over the next four years on a new fleet of vehicles. Manabe said that could mean three or four different sizes of vehicles to handle different package volumes in urban and rural areas.
Some industry experts are concerned that the USPS, whose operations are dictated by Congress, may have trouble handling e-commerce growth due to its quasi-government unionized workers.
"When I think about the USPS business model, I don't believe they are ever going to get the productivity of FedEx or UPS," said Brian Hancock, a board member of the Council of Supply Chain Management Professionals.
But Manabe insists the unionized work force is on board and recognizes the importance of e-commerce.
The last few delivery days before Christmas have been a test for the USPS. After struggling with a late surge in online orders last year that left an estimated 2 million packages stranded on Christmas Eve, UPS and FedEx both made it clear this year that they would reject a last-minute flood of packages if it threatened their systems.
Rick Jones, a former UPS executive and now CEO of regional delivery company Lone Star Overnight, says that for many retailers this holiday season, the USPS may have become the carrier of last resort.
"The question is whether their smaller vehicles, which are designed for mail rather than packages, could handle the extra volume," he said.
Source:-The Times of India
