Holiday e-commerce deals may deliver surge in U.S. Postal Service revenue

WASHINGTON Wed Nov 13, 2013 6:50pm EST

U.S. postal service trucks sit parked at the post office in Del Mar, California November 13, 2013. REUTERS/Mike Blake

U.S. postal service trucks sit parked at the post office in Del Mar, California November 13, 2013.

Credit: Reuters/Mike Blake

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WASHINGTON (Reuters) - The U.S. Postal Service, bleeding millions of dollars daily, is hoping the 2013 holiday season will boost its finances through a partnership with Amazon.com, a surge in online shopping and the timely release of a new stamp featuring a whimsical Yule gingerbread house.

The holiday shopping and card- and gift-sending season usually is a busy time for the USPS, which expects a 12 percent jump in package volumes to 420 million this year from last year's holiday season, it said.

The service is struggling financially as mail volumes tumble because more Americans now communicate and pay bills online, and as massive payments into its future retirees' healthcare fund mandated by Congress take a toll.

Yet the potentially lucrative deal with online shopping giant Amazon to deliver packages on Sundays positions USPS to compete more favorably in the $186-billion annual e-commerce market. Retail sites must use ground delivery services to get purchases to their destination.

Parcel delivery is "the part of the business that the Postal Service needs to rely on to become sustainable," said Rick Geddes of Cornell University who has written about USPS.

The National Retail Federation expects holiday online sales in November and December to increase by about 15 percent from those months last year, to approximately $82 billion.

Amazon's arrangement with USPS applies only to deliveries in select large cities including San Francisco and New York, which will help it in those cities versus its main competitors, FedEx Corp and United Parcel Service Inc, that offer no Sunday delivery.

USPS has focused on package delivery as a key growth area. In its third quarter that ended June 30, revenue from deliveries grew 22.6 percent from the previous year.

While this holiday's e-commerce alone is unlikely to significantly improve USPS's long-term finances, partnerships with companies like Amazon and an arrangement to sell its services out of Staples Inc stores will make it more competitive, said Geddes.

The agency also expects to lure more customers with new free package insurance and free tracking on priority mail, features it introduced in August, and hopes the gingerbread house stamp will encourage more people to send greeting cards.

The carrier lost nearly $16 billion last year and is seeking legislative relief to allow it to manage its own healthcare system and to find more innovative revenue sources.

Without legislative flexibility to run its own affairs, innovate and raise revenue, Postmaster General Patrick Donahoe has said the agency could require a taxpayer bailout of nearly $50 billion by 2017.

A Postal Service spokeswoman said details about revenue and package volume expectations from the Amazon partnership are confidential.

(Reporting by Elvina Nawaguna; Editing by Marilyn W. Thompson and Philip Barbara)

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Comments (5)
Whittier5 wrote:
I am surprised that the teawhackadoos in the House and Senate haven’t stuck their nose in to screw up this deal. The neo-CONs really crippled USPS in 2006 to CTAs Budgetarily speaking (Cover Their @sses).

There are many services the USPS could offer to increase revenue if the Congress would stop micromanaging like they did also with NASA. We would have had permanent base on the Moon. a visitable space station, and reached Mars, if they’d gotten out of the way 30 years ago (and since).

Nov 14, 2013 8:53am EST  --  Report as abuse
JamesChirico wrote:
Blame our elected officials for the postal service losing money. A 4 cent increase in rates puts them into the black. The PO rates for a letter, for a small package, for bulk mailers is absurdly low. Any courier service will charge 25 times the rate of the PO to send a letter, 8 times the amount for a couple of lb package of papers. I for one would like to see bulk mail rates go up a dime to not have so much junk mail delivered to my home.

Nov 16, 2013 8:35pm EST  --  Report as abuse
chekovmerlin wrote:
This particular time of year has us remember the it is catalog time. Bulk mail. Probably 75-80% dumped right away. And they get the cheapest rates imaginable. If more was charged these people then people would only get the catalogs they want, if any. If USPS were allowed to pay into their pension in a responsible manner rather then by bludgeoning them with outlandish time frames, they would be in the black. I agree with those who said the Tea Party crowd on the right is at fault. God help us if first class mail must go private with different companies delivering the mail. Of course that would be a first in the world. What an honor! NOT!

Nov 17, 2013 12:17am EST  --  Report as abuse
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