Postal Service Delivers Bad News to Retailers

Discussion
Dec 07, 2011
George Anderson

Retailers count on the U.S. Postal Service (USPS) to make deliveries in all kinds of conditions and on most days of the week. But that’s about to change with the announcement this week that the USPS was looking to reduce billions of dollars in operating costs by closing offices and making changes in its delivery practices.

"The biggest challenge retailers will face will be the end to next day delivery service as well as the likely end of Saturday deliveries. In the past, retailers have relied on Saturday delivery service to get new items in their stores for the following week and catalogs to their customers," Kathy Doyle Thomas, chairman of the board for the Retail Advertising and Marketing Association (RAMA) and executive vice president of Half Price Books, told RetailWire.

One of the retailers likely to be affected by changes at the USPS is Netflix.

Tony Wible, an analyst at Janney Capital Markets, told Forbes that despite the company’s move into streaming videos, "The DVD business is the one that is actually driving profits."

Changes at the USPS will create challenges for many others, as well.

"The reality is shopping habits have changed over the last few years, with consumers doing more online research and getting the best prices through retail websites. Because of that, we as retailers have to constantly reinvent ourselves to adapt to the market, often doing more with less resources," said Ms. Doyle Thomas. "Retailers will need to plan in advance for their direct mail pieces. Consumers will receive more mail during the week, so it will be important to make sure to time the mailing correctly and make the creative stand out."

Discussion Questions: How do you think changes at the United States Postal Service will affect retailers most? What can retailers do to compensate?

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23 Comments on "Postal Service Delivers Bad News to Retailers"


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Dick Seesel
Guest
9 years 5 months ago

The writing has been on the wall for many years at the USPS. Reed Hastings of Netflix said several years ago that prospects of postal service declines kept him awake at night…and this was during the heyday of Netflix’s mail order service. Whether you agree with some of Netflix’s marketing missteps or not, they have at least moved fast to a streaming model in part due to USPS service cuts.

As to the question of direct mail, retailers depend on this medium as consumers turn away from reading the print newspaper. It’s not just a question of timing and creative, but also cost management in light of higher USPS fees to deliver mail. Retailers would be wise to reallocate their marketing resources to online and mobile at a faster pace because the long-term trend is irreversible.

Warren Thayer
Guest
9 years 5 months ago

Most of this is hyperventilation. UPS, FedEx and other services are increasingly picking up the slack and answering retailers’ needs economically and with more efficiency and speed than “the mail.” USPS should be doing more to reinvent itself, besides just downsizing and keeping on keeping on.

David Livingston
Guest
9 years 5 months ago

I would love to see postal deliveries down to three days a week. I get very little mail. I get now in a month what I used to get in week. One day longer on a letter or package isn’t going to hurt anyone. If you need overnight delivery, if it’s that important, FedEx and UPS are there.

W. Frank Dell II
Guest
9 years 5 months ago

Eliminating next day delivery will have little impact on retailers. Most web sites try to charge extra for next day delivery. I for one rarely if ever will pay for faster delivery. This is a market segment that FedEx excels in. The USPS has been behind the competition for years. They are just now accepting defeat. Eliminating Saturday delivery will have little effect. Retailers buying any quantity of merchandise except jewelry are not counting on the USPS for inbound product flow. It is simply too expensive. Fact is, the USPS should have made these changes years ago.

Max Goldberg
Guest
9 years 5 months ago

Retailers and consumers will adjust to changes in the postal service. When those changes are implemented there will be a lot of griping, but in the end, everyone will adapt. Next day delivery will still be available at a higher price, as it is now. Catalogues will still arrive, but maybe a day later. Good creative will still be necessary, as it is now. The sky is not falling. The sun will still rise in the East.

Tony Orlando
Guest
9 years 5 months ago

The Post Office has been a non factor in my business for years. We used to bulk mail our ads, and it became too costly, and some ads were not distributed properly anyway. UPS or FedEx will be glad to take them over. My concern is the bloated pension guarantees given to all the retirees. We as taxpayers are on the hook for many billions of dollars in pension, and health care costs, without any say in it.

Ian Percy
Guest
9 years 5 months ago

“Deal with it!” That’s the Canadian message to the public when changes like this are necessitated. Canada created a new flag. Huge uproar for a week. Canada went to $1 and $2 coins instead of paper. Huge uproar for a week. Decades ago Canada Post dropped Saturday delivery. Huge uproar for a week. For goodness sakes America — Deal with it! This entitlement mentality is becoming simply ridiculous. Can anyone imagine any of these changes happening in the US? And we wonder why we’re struggling with innovation?

And frankly, the idea of raising postage one cent is equally ridiculous. You get no more uproar if you went ahead and raised the first class postage to a dollar. A whole dollar for someone to carry your letter 3,000 miles! Oh the humanity.

I’m with David. A few less trips to the mailbox is just fine with me. Heck I usually let it pile up for a couple of days anyway.

Bill Emerson
Guest
Bill Emerson
9 years 5 months ago

Potentially this could become a big break for retailers. If the USPS is replaced by a FedEx or UPS, it would replace a bureaucracy with no profit motive and huge sunk costs with a more efficient delivery mechanism. It also has the benefit of forcing retailers to adapt to a more updated approach to communicating with their customers. There used to be the Pony Express and then along came the railroads and so on and so on.

Bill Bittner
Guest
Bill Bittner
9 years 5 months ago

I don’t think the impact on retailers will be that great. If a retailer hasn’t already put their offerings online and made it possible for customers to interact through their website, it might speed that process but where has that retailer been the past 10 years? I think consumers are going be impacted more as they are forced to change habits and use electronic communications more than they have in the past. Many people still use the library for their computer access and don’t have a cell phone. It is becoming more difficult for someone to exist “off the network.” Even if the broadband network is expanded to all corners of the earth, devices are necessary to access it. I think Cloud Computing and the whole idea of network based storage will be a larger impact on consumers than anything the post office does.

Mark Burr
Guest
9 years 5 months ago
So what’s left when this is all over? That is, the transition of what would have been normal “Mail” to all electronic? Let’s face it, this isn’t like the long-term projections with other media like newspapers and books. This is reality. At some point, there actually will be no more “mail” as we’ve known it for generations. So, what’s next? What will be left is what FedEx and UPS already do best. However, the USPS at least had the infrastructure and ability to do it better. Are these changes positioning them to compete in the market of what’s left? Or, are they simply making reductions in what will eventually be gone and not positioning for a future whatsoever? The DVD business will transition also and you can see that trend in NetFlix already with creating different market niches and content. Retailers can find ways to serve as bill payment outlets for those that remain without online services. Other options through local libraries, banks and other sources can fill the gap as well for the transition… Read more »
Ralph Jacobson
Guest
9 years 5 months ago

There’s rarely good news in the mail. The USPS can just keep mine, thanks.

Ed Rosenbaum
Guest
9 years 5 months ago

What’s the big deal here? Is it the Postal Service is cutting back on service; which is something they should have done years ago? Or is it that retailers have sat back twiddling their thumbs saying this will never happen? We should have been preparing for this for years. It is and was inevitable that something drastic has to happen or survival is not going to be an option.

I am sure the retail and business world will adapt to not having Saturday delivery and slower regular delivery. It took the USPS too long to realize they had competition from FedEx and UPS. It has taken too long to initiate changes.

Mike Blackburn
Guest
9 years 5 months ago

The lion’s share of postal service deliveries is now effectively “subsidized” delivery of business and non-profit junk mail. If I take out the sales ads, credit card offers and requests for cash from charities, I might get three or four pieces of actual mail a week. Time to downsize. Another reason for their recent financial issues is a 2006 law which required the USPS to pre-fund future retirees’ health benefits, 75 years into the future.

Roger Saunders
Guest
9 years 5 months ago

First and foremost, don’t blame the messenger — in this case the Post Office. That group has been seeking the support of Congress to discontinue Saturday delivery, close unproductive post offices, properly fund agreed to pension programs, and trim the number of associates for well over 5 years.

Retailers need to let the Post Office run their business in the manner that permits them to make money and fund themselves. DO NOT RUN to Congress, and ask them to step in, much as they did with the “Durbin Amendment” to alter Debit Card payments. If they like the revised services, and want to pay for them, stay with it. If not, find alternative delivery systems that fit cost and timing needs.

Retailers will likely find some higher costs of operating as the Post Office is permitted to downsize. They will also find innovative new ways to meet the consumers’ needs. Let the marketplace take on its role.

David Slavick
Guest
David Slavick
9 years 5 months ago

Planning better is a start for many retailers and service providers. No big surprises here and for those retailers in need of advice as to how best to address this tactically there are solid consultants to assist. Adjust — your coupon expiration dates, your price/feature timing in-store (a big one potentially), do a better job of monitoring your in-home delivery and work proactively with the regional VPs at USPS to hold them accountable. One less day (drop Saturday) or eventually take it down to M/W/F — it will still be a viable media form and service/information delivery channel. Cut the costs to remain “viable.” It’s the right move, likely 5 years late, but we’re talking a highly matrixed bureaucratic organization. Sad part is the statistics on employment profile/skew. African-American employees are 2x represented in the USPS workforce vs. other industries, and communities near postal locations set to close will have unemployment spike to an even worse level (>20%) than at present in this segment of the population.

Mark Heckman
Guest
9 years 5 months ago
The reduction of services from the USPS should be of surprise to no one who has been monitoring their financial dilemmas as well as understanding the rapid transition from paper mail to electronic forms. With that said, it comes at time when online shopping is ramping up and its growth will be heavily dependent upon fast and affordable delivery service. FedEx and other commercial carriers will no doubt grab some of business that will erode from the USPS due to its diminished level of service. Retailers who heavily rely on the postal service will need to huddle quickly and develop a “Plan B” for both incoming products and outgoing e-commerce deliveries. In some cases this may mean the more efficient logistics planning and in other cases an increased use of commercial carriers. Not unthinkable for a select few larger retailers with the economies of scale on their side, is the development of their own home delivery systems. I certainly could envision a Walmart or Target van pulling in my drive in a few years when… Read more »
Dennis Serbu
Guest
Dennis Serbu
9 years 5 months ago

Retailers will adapt and bear the costs. There are no surprises here when you have a “private” entity overseen by political forces. Left on their own, the USPS could be profitable and efficient. The USPS was granted a mail monopoly so that EVERY address would be served. Even those in Rio Linda, California. Private enterprise will avoid high-cost areas. By becoming less competitive, the USPS volume will drop, making a bad situation even worse. Get Congress out of it and they may not only survive, they will thrive.

Verlin Youd
Guest
9 years 5 months ago

Honestly, I don’t really see this as a challenge for retailers at all. In the US, retailers have multiple choices for next day and overnight delivery, including UPS and FedEx, and will quickly move business they have with the USPS to one of these other channels. Outside the US, retailers have multiple options as well. The harsh reality is that FedEx and UPS continue to innovate in order to remain relevant with strong value propositions, and the USPS has not.

Ben Ball
Guest
9 years 5 months ago

I was surprised, but not shocked, to learn recently that UPS actually delivers presorted and bundled packages to local USPS offices so they can deliver them. It apparently has to do with some “agreement” that the USPS gets to deliver anything that “fits in a mailbox.” So UPS is effectively subsidizing the USPS now.

Scanner is right, the paper letter/statement/bill is a dodo bird within the next ten years anyway. If the USPS can’t figure out something else to do, they should be as well.

Janet Dorenkott
Guest
Janet Dorenkott
9 years 5 months ago

Most retailers get their products delivered by the truckload via distributors. Times are evolving. We don’t see blacksmiths repairing horseshoes on the street corner anymore, we see tire dealers selling tires. The postal service delivers far fewer items than in the past, thanks to email. Physical mail will never go away completely, but it seems obvious that much of their manual labor has been replaced with technology, and that’s a good thing. USPS has less money, they do less work, they need fewer hours. Time to cut back.

Mel Kleiman
Guest
9 years 5 months ago

Once they start cutting back they will need to keep cutting back. Less service will mean less business, which will mean even less service. Mail service as we have known it in the past will no longer exist.

For retailers, it will just be another slight blip in the ever changing world of business.

Craig Sundstrom
Guest
9 years 5 months ago

Like most everyone here, I think the effect will be small to none: even retailers who now make extensive use of the USPS — i.e. mail order sellers — would only see deliveries of whatever delayed by a day or two…for now, at least. So why are there so many responses (of people devoting time to an issue they say is unimportant)? It seems to have touched off an ideological outpouring: the legions of people who believe FedEx/UPS’s ability to deliver for $14.95 what the Post Office does for 44 cents is somehow proof of the superiority of private enterprise.

Kai Clarke
Guest
9 years 5 months ago

This will not substantially impact retailers and their package delivery efforts. There are 2 other alternatives (UPS and FedEx), plus unlike the comments made in the article, companies like Netflix have to move to an online model since their delivery model is rapidly going away. People are no longer purchasing DVDs when they can download the file, game or movie online. Just like sending letters, the communication of information and media is moving away from a physical model and towards an electronic one. This means less demand for the USPS more than anything else….

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