The U.S. Postal Service (USPS) is testing a product where it picks up e-commerce orders held at retail stores on Saturdays for deliveries to residential addresses on Sundays.
The product, which is being piloted in 20 U.S. markets, is designed to support ship-from-store programs being implemented by retailers as they build and refine their strategies for omnichannel fulfillment, where product can be pulled and delivered from any location that is in close proximity to the end customer. USPS currently serves 21,000 U.S. retail stores. However, many stores are in markets not served by the pilot, said Dennis R. Nicoski, USPS' manager, field sales strategy and contracts.
USPS unveiled Sunday delivery in November 2013 through an initiative with Amazon.com Inc., the Seattle-based e-tailing giant. That program remains in effect. The pilot effort is designed to leverage USPS' ubiquitous delivery network for the potential benefit of other retailers. By law, USPS is required to pick up and deliver to every U.S. address; it currently serves 156 million addresses.
The Sunday delivery network covers about 10,000 ZIP codes with a territory equal to 70 percent of the U.S. population, Nicoski told a group at the annual Parcel Forum last week in Nashville. USPS doesn't make any pickups on Sundays.
Saturday cut-off times for pickups under the pilot program will vary depending on the market, Nicoski said.
The pilot reflects retailers' desire to meet the 24/7 ordering demands of consumers, who have been conditioned through their reliance on digital devices to expect their orders to be delivered as quickly as possible, and sometimes during unconventional periods such as Sundays. Consumers are also increasingly demanding that their retailers offer free shipping, leading Nicoski to remark tongue in cheek that "soon a carrier may be paying a shipper for the privilege of moving a package."
The pilot is also part of USPS' effort to push even more parcels through its network as it confronts the secular decline of its core "First-Class Mail" and "Marketing Mail" products, the latter composed of items like marketing circulars, which are fast converting to digital format.
In its third fiscal quarter, mail volumes declined year over year by approximately 1.4 billion pieces, or about 4 percent. By contrast, package volumes grew by 133 million pieces, or approximately 11 percent, USPS said. However, the package business is a relatively low-margin endeavor, because it is more labor-intensive than sending letters. Letter processing, by contrast, is highly automated. As a result, letter mail produces a very healthy margin for USPS.
In a related development, USPS is looking to broaden its geographic footprint with carrier partners to deliver groceries and pre-packaged goods, as a three-year pilot program winds down at the end of October, Nicoski said. The pilot has covered eight U.S. markets, and Nicoski said that USPS is "open to discussions" to expand its market coverage.
The quasi-government agency will also begin deploying next-generation delivery vehicles by 2020 to replace the 134,000 traditional boxy trucks that Nicoski said have long outlived their life span. Perhaps not surprisingly, the newer vehicles are being designed with a broader midsection to accommodate more package cube than ever before.
USPS plans to hire 35,000 seasonal workers to help manage the upcoming holiday peak-demand period, Nicoski said.
Gartner, Inc.
