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Can Ecommerce Save the U.S. Postal Service?

Posted by jtolman to Ecommerce News on November 18th, 2013

This year is the seventh consecutive year of losses for the U.S. Postal Service, as communication is becoming increasingly electronic.  USPS is finding that ecommerce businesses are actually aiding them in their road to recovery. From Amazon to Staples, different shipping and package businesses are joining forces with USPS in order to curb their losses. This year, USPS reported their losses to be $5 billion down from last year’s $16 billion.

In conjunction with its new partnerships, USPS has been doing some cost cutting, as well. Despite their aggressive reduction in employee hours as a means to cut costs, the agency is still struggling because of the mandatory retiree health fund, which was mandated by Congress in 2006.  In addition, there has been a continuous slide in first-class mail, which is currently USPS’ most profitable product.  Stamped, first-class mail fell by 2.8 billion pieces this year.

The U.S. Postal Service is seeking legislation, which could relieve the financial pressure of the retiree payments. It is also seeking to move towards a five-day mail delivery service and to close some post offices. USPS has already cut 12 million hours this year by consolidating mail processing centers.

Several industry influencers including, Darrell Issa, Government Reform Committee Chairman, and Blake Farenthold, a postal subcommittee Chariman, have joined together in making a statement about the continued losses USPS faces if Congress does not step in soon.

“Based on briefings the Committee has received from USPS, this is likely the last year that ongoing cost-cutting measures will generate significant savings,’’ the lawmakers said. “There is no doubt that mail delivery will be affected in the near future without Congressional action to cut costs and restructure USPS finances.”

Although it is unlikely that Congress will step in by the end of this fiscal year, USPS has its own agenda on increasing revenues and its enlisting the help of a few of the top ecommerce giants in the nation.

“We’ve achieved some excellent results for the year in terms of innovations, revenue gains and cost reductions, but without major legislative changes we cannot overcome the limitations of our inflexible business model,’’ Postmaster General Patrick Donahoe said in a statement.

Due to the increase of online shopping and ecommerce sales, USPS may have a promising future just yet.  This year alone, package volumes grew to 210 million pieces.

The U.S. Postal Service announced its strategic partnership with ecommerce giant, Amazon.com.  Amazon.com is already delivering packages on Sundays in cities, such as New York and San Francisco.

“We’re excited that now every day is an Amazon delivery day.” said Dave Clark, Amazon’s vice president of worldwide operations and customer service in a press release on Monday.

The U.S. Postal Service will also be selling its services out of Staples Inc. office supply retail stores across the nation.

With the help of ecommerce growth, USPS’ operating revenues have risen from $65.2 billion last year to $66 billion this year.  This is the first sign of growth that USPS has seen in revenue since 2008.

President of the National Association of Letter Carriers, Fredric Rolando said, “With the economy gradually recovering from the recession, the Postal Service has returned to operational profitability—with an operating profit of $600 million delivering the mail this fiscal year.”

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