The Internet, as everyone knows, has devastated the U.S. Postal Service. But what if the same forces could be harnessed to resuscitate the money-losing federal agency?
That’s what U.S. Postmaster General Patrick Donohue is hoping today as he unveiled a deal to provide Sunday package delivery for Amazon.com (AMZN). Government mail carriers will begin delivering Amazon boxes this week in Los Angeles and New York, as the Los Angeles Times reported, and the service will expand next year to Dallas, New Orleans, Phoenix, and other cities.
More than anything, the agreement suggests that there is a future in the digital age for the 238-year-old agency, which lost $15.9 billion last year largely because of the disappearance of first-class mail and the 2006 law requiring it to pre-fund health care for its retirees. The USPS lost 21 percent of its volume between 2008 and 2012, making any viable future seem far from evident. But volume has stabilized a bit: First-class mail revenue fell only 3 percent last year to $28 billion, and the growing popularity of online shopping pushed shipping and package revenue up 5 percent to $11 billion.
Still, the USPS needs to do better than that to survive. While the Amazon deal is likely to drive the agency’s shipping volume substantially higher—neither the USPS nor Amazon would disclose financial terms—it’s safe to assume this isn’t wildly lucrative for the postal service. As it stands now, UPS (UPS) and FedEx (FDX) deliver more of the bigger and more lucrative packages and leave the smaller stuff to the government mail service.
But the agreement is hugely important for the agency. USPS won Amazon’s Sunday business in the face of competition from its private competitors, according to the Wall Street Journal, in a sign that the USPS and its unions are willing to innovate. An agency spokesmen told the Journal that the USPS wouldn’t need to hire any additional workers to begin Sunday package service; instead, post office managers have been working for more than a year with a “flexible workforce” willing and ready to provide a seventh day of delivery.
The agreement may also make it easier for the postmaster general to get congressional approval to carry out his restructuring plans. Donohue has been campaigning to end Saturday letter delivery, close money-losing postal facilities, and restructure the service’s health benefits. His opponents respond that Donohue isn’t doing enough to grow the agency’s business. They can’t say that anymore. Now maybe congressional critics will be more receptive to his argument that the USPS needs to cut costs, too, if it wants to have a future.