We’ve come a long way from the Pony Express. In today’s world of technological instant gratification, the financially struggling United States Postal Service believes it can turn a profit by offering same-day delivery to Internet shoppers. Beginning Dec. 12, the USPS will pilot the program in the San Francisco area, partnering with about 10 national retailers that have not yet been announced. Shoppers who order goods by 2 p.m. will have their items delivered by 8 p.m. the same day.
According to the Associated Press, the new program, entitled Metro Post, has been developed to offset losses due to declines in first-class and standard mail in recent years. The USPS projects the new program will generate anywhere from $10 million and $50 million in revenue in San Francisco—or $500 million if expanded to 10 cities. The projected revenue is still a drop in the bucket compared to the $15.9 billion annual losses reported by the USPS last week, however.
“There is definitely consumer demand for same-day delivery, at the right price,” Matt Nemer, a senior analyst at Wells Fargo Securities in San Francisco, told the Associated Press. “The culture in retail traditionally has been to get a customer into the store, with the immediacy of enjoying a purchase being the main draw. So same-day delivery could be huge for online retailers. The question is whether the economics can work.”
Pricing for the service will be similar to programs launched by other organizations such as Wal-Mart and Amazon, which charge $10 per delivery. Provided the program is a success, it will be expanded to other major US cities, including Boston, Chicago and New York, in 2013.
According to Nemer, the odds are in favor of Metro Posts’s success. Consumers are known for seeking quick delivery and reasonable charges. For example, Amazon offers a popular program where, for a $79 annual fee, customers can receive free two-day shipping for a year. Other consumers will actually purchase a higher priced item if it offers “free” shipping. The USPS actually has a leg up on other services because of its existing network of delivery routes to every US home.
“Customers do like same-day delivery when it gets very close to a holiday or it otherwise becomes too late to shop,” Jim Corridore, analyst with S&P Capital IQ, which tracks the shipping industry, told the Associated Press. “But while the Postal Service has the ability to deliver to any address, they are not always known for their speed. To increase their speed might prove to be a much more complex offering than they’re thinking about.”
