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Postal Service Looking to Grow Experimental Delivery Business

The U.S. Postal Service has been mired in what might be described as a perfect storm of financial woes, but the embattled agency is looking ahead to expanding its partnerships and offering a new wave of innovative and competitive services such as grocery delivery.

Postmaster General Megan Brennan and other senior government officials appeared before a Senate committee on Thursday to discuss the agency’s precarious situation, appealing for legislation that would provide relief from its crushing financial obligations and open the door to expand its offerings beyond the traditional delivery of mail and packages.

That session, like most discussions of the Postal Service’s finances, was full of grim assessments about the unsustainable path the agency is on, weighed down by statutory requirements to prefund employees’ retirement health benefits and other burdens that threaten the viability of one of the government’s oldest institutions.

But Brennan and other witnesses struck a note of optimism when asked to imagine what a postal service of the 21st century might look like, one that will be based in large part on expanded ecommerce services delivered through the unrivaled USPS infrastructure that extends to more than 150 million U.S. households.

“If you consider our infrastructure, it’s important that we innovate at the core, which we’ve been doing when you consider the growth in market share in our package volume, looking at customized delivery solutions with this exponential growth in ecommerce,” Brennan told members of the Homeland Security and Government Affairs Committee.

“When we look beyond the current statute,” she said, “fundamentally we’re looking for more flexibility in pricing and product.”

The statute Brennan referenced is the 2006 Postal Accountability and Enforcement Act, which imposed “constraints that make it impossible to maintain financial stability while achieving our primary mission of providing prompt, reliable and efficient postal services and meeting our other legal obligations,” she said in her written testimony.

Brennan’s wish-list for Congress is by now familiar to USPS watchers: preserve the “exigent” rate increase for market-dominant products that’s set to expire in April; fully incorporate Medicare into retirees’ health plans; and open the door to new products and services.

So while the Postal Service looks to address the big-ticket items that have added up to billions of dollars in losses over the past several years, it is also actively courting new delivery partners and exploring an expanded menu of services.

One is the grocery delivery trial that the agency began a couple years ago in San Francisco, and has since expanded. Brennan said that the agency is in active discussions with prospective new partners in the grocery arena, hinting also at other lines of business the agency is exploring.

“We look at that, again, as an opportunity to innovate at the core, leveraging our infrastructure and looking at other ways to generate revenue. So we are talking with a number of potential customers about expanding that type of service and also looking at other physical goods that we could deliver,” she said.

A spokesman for the Postal Service declined to comment on any specific ventures the agency is exploring, but referred EcommerceBytes to this passage from Brennan’s written testimony:

“To spur additional growth in our package business, we are partnering with a number of major U.S. retailers to develop customized delivery solutions to meet their particular business needs. Examples of the solutions we have developed include our Sunday, grocery and same-day delivery initiatives, as well as our “ship-from-store” agreements that expedite the delivery of goods from businesses to consumers and improve convenience.”

There was some talk at Thursday’s hearing about the competitive disadvantage the Postal Service finds itself in alongside rivals like UPS and FedEx, which enjoy the freedom to set their own prices and don’t labor under the USPS’ universal-service mandate.

“The key here is the Postal Service must maintain a network that reaches all 155 (million) delivery points, whereas the UPS and FedEx can pick their spots – dense urban markets where the cost per unit of delivery is much lower than servicing all 155 (million),” said James Millstein, the former chief restructuring officer at the Treasury Department who now heads the financial-services firm Millstein & Co.

Brennan also floated the idea of equipping the Postal Service’s sprawling fleet of vehicles (many of which are long overdue for an upgrade) with sensors that could contribute to the Obama administration’s “smart cities” initiative by reporting on issues like air quality, road conditions and traffic. The Postal Service’s nationwide footprint could help out with other government initiatives as well, such as the work of the Census Bureau, Brennan suggested.

There was little disagreement that there is more value to be gleaned from the Postal Service’s vast delivery network and its physical infrastructure. But Brennan, for all her optimism about the prospects for a 21st century postal service, was on hand to remind members of the committee that financial relief legislation is an imperative, not just for the expansion into new service lines, but to keep the institution performing its most basic functions.

An exchange with New Jersey Democrat Cory Booker was representative:

“What’s the urgency in terms of a timeline for this legislation? How urgent is it to act?”

“Senator Booker, the time is now,” Brennan said.

“And the consequences for delay?”

“The consequence is that it would necessitate us making decisions around defaulting on additional obligations that potentially puts our core mission of delivering the mail to every American at risk.”

“So this is not something that should wait until after a presidential election or until the next congress? This is something that really needs to be done right now?”

“The time is now, sir.”

Kenneth Corbin on Linkedin
Kenneth Corbin
Kenneth Corbin
Kenneth Corbin is a freelance writer based in Washington, D.C. He has written on politics, technology and other subjects since 2007, most recently as the Washington correspondent for InternetNews.com, covering Congress, the White House, the FCC and other regulatory affairs. He can be found on LinkedIn.