E-Commerce: The Postal Service's Delivery Role

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These day's every business -- including the U.S. Postal Service -- is trying to determine its role in e-commerce. Indeed, many are trying to determine if they have a role.


As I see it, there are two primary paths that the USPS could take. Note that I'm ignoring the selling of its own products and services via the Internet.


One primary path would be a direct involvement in the Internet. Here the USPS could use its position as trusted independent entity to certify delivery of e-mail, ensure the security of financial transactions and act as a trusted third party.


This path would involve the USPS in an area that it has yet to demonstrate expertise. However, it's an arena that some are experimenting in. For example, New Zealand Post plans to become involved in electronic billing.


A second, more traditional path for the USPS in e-commerce would be to expand its role in the logistics supply chain. This role would use its traditional role as the country's universal delivery service. Indeed, a number of companies are showing interest in establishing roles in the Internet supply chain.


For example, the recent purchase of Fingerhut by Federated Department Stores seems to have been motivated, in part, by Fingerhut's logistics abilities. Those capabilities have won Fingerhut an order from Wal-Mart to process Wal-mart's e-commerce activities. GE/NBC recently announced that it has exercised an option to purchase 39.9 percent of the cable TV channel ValueVision. NBC's CEO Robert Wright said that one of the reasons for their investment was the growth in e-commerce and ValueVision's abilities in fulfillment, warehousing and distribution.


The USPS also has appreciated the need for an expanded logistics reach. Their recent alliances with DHL and Airborne Freight are proof of that understanding.


The Service's alliance with Airborne is particularly interesting. Here the USPS will provide residential delivery for packages in the Airborne delivery network, but not for overnight or express delivery. This seems to be an alliance made for e-commerce generated parcels. It is linking into what is almost universally considered to the USPS' strength: its residential delivery network. Most importantly, worksharing changes in the last rate case provide significant postage discounts if parcels are entered into the USPS network at the destination postal sectional center or local delivery unit. Given the volumes that Airborne is expected to generate, they should be able to take advantage of these attractive rates.


The question I would raise is, is the USPS's residential delivery network up to the demands of e-commerce delivery?


First, it lacks delivery service standards. There are somewhat vague delivery standards for Priority Mail parcels -- two to three days -- but no delivery standards exist for nonpriority parcels. But for both groups, there is no reporting on actual delivery service. If the USPS is to become a significant factor in e-commerce parcel delivery, it will need to establish and report on delivery service standards.


But let's take a closer look at parcel residential delivery itself. Is the service adequate to the task? Not only do e-commerce generated parcels require delivery service standards, but it requires successful delivery to the home. Experience has taught us that with the fellows (and ladies) in the brown trucks -- the competition -- a successful delivery to the home is pretty much assured.


I've often asked USPS managers what percentage of parcel delivery attempts are successful? The response: they don't keep that statistic, but it's not a major issue. Try telling that to those folks who need to go to their local post office to wait in line during working hours or on a Saturday.


It's possible that the USPS's existing delivery network, while excellent for letters, catalogs and magazines may not be adequate for an expanded role in delivering an increasing volume of e-commerce generated parcels.


It may well be that as parcel volumes increase, the USPS may need to consider the establishment of a new, separate delivery service, strictly for parcels. The requirement may be for a part-time delivery network, one more in sync with the complex lifestyles of the two income families or single parent households of today.


Customer pick-up locations for undelivered parcels will need to be established at nontraditional locations. Perhaps convenience store outlets, open 24 hours, 7 days a week could serve that role. The USPS's chief marketing officer, Alan Kane, has spoken of the importance of product return processing in the e-commerce cycle. These convenience outlets could serve that role as well.


A different kind of residential delivery (and return) service will require a fair amount of "outside the box" thinking for both postal managers and union leadership. If past is prologue, the likelihood of these two groups reaching agreement on a new paradigm for residential delivery is not good.


For example, the failure of the USPS to capture the bulk of the automation savings from Zip+4 delivery point sequencing is generally considered to result from the inability of the National Association of Letter Carriers and postal management to have agreed on implementation strategy. Similarly, previous USPS attempts to open postal counters at Sears store locations met strong union opposition.


If the primary e-commerce opportunity for the USPS is a significant increase in parcel delivery volume, the USPS's ability to respond in a consumer-friendly manner to new service demands will require union and management leadership to demonstrate a level of cooperation that has often been missing,


Let's hope the sides are up to the task -- much of the USPS's future may depend on it.


Cary H. Baer is a New York-based direct marketing consultant and chairman of the Advertising Mail Marketing Association.
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