USPS expands its reach at private sector expense

2/18/2015

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SPECIAL DELIVERY: Free-market advocates worry that the quasi government U.S. Postal Service will disrupt private-sector competition as the Post Office expands its business service footprint.

By M.D. Kittle | Watchdog.org

The debt-ridden U.S. Postal Service is looking to expand its service footprint from well beyond its core mail-delivery operations — everything from grocery delivery to payday loans.

But the quasi-governmental agency’s hunt for badly needed revenue streams is coming at the expense of private-sector competitors, undercutting the basic principles of the American free-market system, critics contend.

In October, the Postal Regulatory Commission signed off on a plan allowing the Postal Service to deliver groceries in San Francisco, working with mega online retailer Amazon.com to do it. The test project eventually could be expanded nationwide.

While the commission capped annual revenue from the USPS’ new delivery service at $10 million, for now, free-market advocates are concerned about the incursion on the private marketplace by a competitor that already holds a government-granted monopoly on mail delivery.

“We think this is a huge overreach on the part of the USPS,” David Williams, president of the Taxpayers Protection Alliance, told Watchdog.org. “We already have companies that are doing this (grocery delivery). The Postal Service should deliver the mail, to get back to its core business, not this mission creep.”

In its approval order, the Postal Regulatory Commission said the “record contains no indication” that USPS’ involvement in grocery delivery would disrupt the market, but the results are not final.

“The Postal Service began its Customized Delivery Test Market Test on November 1, 2014. At the present time, the Commission has not evidence of an adverse competitive impact,” Gail Adams, spokeswoman for the commission said in an email in response to Watchdog.org’s question.

It’s not clear whether the USPS is on track to hit its revenue projections, Adams said. But the information is expected to be included in the agency’s latest quarterly report, due out soon.

Several USPS programs are federally prohibited from engaging in an “unfair or otherwise inappropriate competitive advantage for the Postal Service,” particularly in going up against small businesses.

Peapod, which launched its grocery delivery business in 1989, appears to be taking the Postal Service competition in stride.

“We’ve always known the potential for this model of online grocery shopping,” Carrie Bienkowski, chief marketing officer for the Skokie, Illinois-based company, wrote in a statement to Watchdog. “Competition is not unexpected, and there is plenty of space in this category for multiple providers.”

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Bienkowski

Online grocery accounts for about 3 percent of the total food-grocery market, which stands at about $600 billion, according to Bienkowski. She said Peapod is first and foremost a food company. That mission focus will make a difference, she said, as more competitors jump into the market.

“… (T)here is an art to getting grocery right, especially in an online environment,” Bienkowski said. “Maintaining a proper cool-storage chain, optimization of routes, enabling choice of delivery — weekday, weekends, mornings, etc. — is quite complex and demanding. We’ve had 25 years to perfect our model.”

The Postal Service has had a bumpy start to another partnership venture with Amazon: Sunday parcel delivery service.

A report by the U.S Postal Service Inspector General late last year found problems during Sunday deliveries with “scanning, sorting, vehicle loading” and more at 40 of 134 hubs inspected in four districts. The OIG said the primary problem was management did not always enforce policies and procedures and supervision was “inconsistent.”

“As a result the Postal Service spent 17,446 more hours from June 15 through July 13, 2014,” than was required to conduct Sunday delivery operations, the report states. Improving efficiency could reduce operating costs annually by $356,736 in the hubs inspected, the report found.

Postal Service employees have complained about the increased demands.

“We are in favor of the Amazon delivery business and Sunday parcel delivery — it’s fabulous and we want it to continue,” Jo Ann Pyle,  president of Branch 79 of the National Association of Letter Carriers in Seattle, told Geekwire in December. “But we have not staffed up properly. We have some employees working seven, 14, or 21 days in a row, and sometimes 12 hours a day. Even though we want the business, that’s an unacceptable way to treat employees.”

The USPS has had struggles with other test ventures, too, such as Metro Post service. The idea was to allow retailers to take orders and have them delivered the same day. That test market in New York and San Francisco seems to have failed miserably. In the initial test, USPS earned $760, while incurring costs of $10,288. In all, the Postal Service delivered 95 packages in five months before the program was suspended.

Critics like Williams, of the Taxpayers Protection Alliance, say the Postal Service’s expanded services are making it lose sight of its core mission — delivering first-class mail to anyone in the United States at a flat low rate. But that service has helped lead to annual multi-billion dollar deficits.

While it is true the USPS has operated independently since 1971 federal taxpayer money, Congress does give the Postal Service $100 million a year to compensate the agency for providing certain services for the government.

And in 2009, the Postal Service began borrowing from the U.S. Treasury to deal with its debt problems, including billions of dollars in pension and health care benefits.

Now, the USPS is entertaining the idea of providing banking services, including payday loans.

U.S. Sen. Elizabeth Warren, D-Mass., has pushed the idea that the Postal Service get into check-cashing business, an idea opposed by many in the banking industry.

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SHE LIKES IT: U.S. Sen. Elizabeth Warren, D-Massachusetts., is among those supporting a check-cashing plan at the USPS.

Mark Dimondstein, president of the American Postal Workers Union, says he wants the Postal Service to bring back postal banking, a service USPS provided up until the 1960s.

“Basic postal banking is done in many countries around the world, and in many of those countries it’s a revenue-driver for the post office,” Dimondstein told the Huffington Post. “We think it’s a win-win-win situation. It’s great for the public. It’s great for the post office. And it’s great for postal workers.”

All of these expanded services by the government-backed Postal Service are a lose-lose proposition for private enterprise and taxpayers, Williams said.

“They need to get back to doing what they did, which is delivering the darn mail,” the taxpayer advocate said.

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