August 2, 2006
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At a recent conference that attracted 15,000 eBay fanatics to Las Vegas, the main sponsor was a big advocate of Web shopping: none other than the United States Postal Service.
By Katie Hafner
"I have one message today for the entire eBay community," said Postmaster General John E. Potter in a speech to the crowd. "We, the Postal Service, we love you. We love every buyer, every seller, every power seller. Thank you for shipping with the United States Postal Service."
Thank you indeed.
As people send e-mail and e-cards instead of handwritten letters and greetings, as they pay more bills on the Web and file tax returns electronically, the Postal Service has started to seem like a drab and tired reminder of the old way of doing things.
Yet the Web is actually injecting new life -- and a sorely needed source of revenue -- into the Postal Service. And it is happening with packages -- millions of them shipped every day, in a journey that starts with a few mouse clicks and ends a day or two or five later at a customer's door.
In 2005, revenue from first-class mail like cards and letters, which still made up more than half the Postal Service's total sales of $66.6 billion, dropped nearly 1% from 2004. But revenue from packages helped make up for much of that drop, rising 2.8%, to $8.6 billion, last year, as it handled nearly three billion packages.
More Boom Than Bust
It is impossible to say how many of these were Web orders, but Postal Service officials give e-commerce a lot of credit.
"Six years ago, people were pointing at the Web as the doom and gloom of the Postal Service, and in essence what we've found is the Web has ended up being the channel that drives business for us," said James Cochrane, manager of package services at the Postal Service.
There are other beneficiaries of Web shopping: FedEx, DHL and the United Parcel Service have all gotten a boost. "E-commerce has clearly benefited all the companies in the package delivery business," said Robert Dahl, the project director of the Air Cargo Management Group, an aviation consulting firm in Seattle.
But nobody needed the new business more than the Postal Service, which now works closely with some Web giants. As early as 1998, when Amazon.com was first grappling with the challenge of volume shipping, William J. Henderson, then postmaster general, talked business with Jeff Bezos, Amazon's founder, Henderson recalled recently.
Patty Smith, a spokeswoman for Amazon.com, said: "We love the U.S. Postal Service. They're critical in helping us get packages out. They hit the customer every day, whether it's with an Amazon package or not."
Netflix, which rents DVD's through its Web site, is so dependent on the post office that when the company needed to fill the job of chief operations officer, it turned not to a general logistics expert but to someone with an intimate knowledge of how mail gets delivered: Henderson.
Netflix ships 1.4 million movies every day, and it expects to spend some $300 million on postage this year. Henderson is "the only guy on the planet who looks at our volume of mail and thinks of it as quite small," said Reed Hastings, the chief executive of Netflix, which is based in Los Gatos, Calif. "It's a trickle of mail to him, where to anyone else it's a torrent."
Since arriving at Netflix, Henderson has helped the company take advantage of discounts available to companies that presort their mail, and improved efficiency at its 40 shipping plants sprinkled around the country, all of them near a mail-sorting center. Netflix plans to offer electronic delivery of movies, but Hastings said the company expected to keep mailing DVD's for some time.
The eBay Factor
One of the biggest boosts for the Postal Service has come from eBay, the Web marketplace, whose sellers ship millions of packages every year.
"Shipping is an incredibly important part of trading on eBay," said Meg Whitman as she introduced Potter at the Las Vegas conference. "The men and women of the United States Postal Service are really the unsung heroes of the eBay community."
According to a study conducted by Forrester Research for Shop.org, a division of the National Retail Federation, Web sales of items that are shipped are expected to rise 20% this year from last year, to nearly $132 billion.
EBay shippers, said Potter in a recent interview, have accounted for more than $1 billion worth of postage since the Postal Service started working with the company in 2004.
"They're very helpful," he said, by way of understatement.
Potter added: "We're finding a lot of synergy between what we have to offer and what some of the companies on the Web are trying to do."
That synergy has given rise to some innovations for both the Postal Service and eBay. Consider the routine annoyance of going to the local post office and waiting in line to have a package weighed. Enter the $8.10 flat-rate box, introduced in late 2004 and big enough to hold five hardcover books, as well as an assortment of services for shippers on the Postal Service's Web site.
"Shipping was obviously of some concern to our sellers who don't have big warehouses and shipping departments," said Chris Tsakalakis, vice president of advanced solutions at eBay. "Obviously the Postal Service knows their business inside and out, and we know our sellers fairly well."
Roy Schott, an eBay seller in Phoenix with enough sales and endorsements from buyers to have reached the rank of "power seller," grows positively romantic when talking about his newly streamlined interactions with the Postal Service.
"I think the post office is an absolutely fabulous partner to eBay," Schott said. "Without the post office, satisfying customers would be much harder. I have delighted customers."
Schott, who sells Zippo lighters and other pieces of vintage Americana, much of it to collectors overseas, does most of his shipping preparation from home.
Clicking and Shipping
The Postal Service and eBay provide him with boxes in a variety of sizes that bear their logos, delivered free by his mail carrier. He is an enthusiastic user of the flat-rate box, and everything else he weighs on his own postage scale.
Using a feature on the Postal Service Web site called "Click to Ship," Schott fills out his labels on the Web, as well as international customs forms, has the postage deducted from his account with PayPal (an eBay service), and prints everything out.
"I have tried to embrace each innovation," said Schott, who has been an eBay seller since 1997, when shipping was far more cumbersome.
Schott said he used FedEx or UPS only for unusually large items, and for those that exceed the Postal Service's 70-pound limit.
Shoes, it turns out, are an oft-shipped commodity. So at the eBay conference in June, Potter unveiled a new shoe-size shipping box. The Postal Service has already distributed 250,000 of them.
Even FedEx depends on the Postal Service to handle some e-commerce deliveries. FedEx now has a service called FedEx SmartPost for high-volume shipping from Web retailers like L.L. Bean. FedEx uses its planes and trucks to get packages to a nearby postal facility, and they are then delivered by the Postal Service, taking advantage of its expertise in handling the "last mile" of mail delivery.
"They're most efficient walking down the sidewalk," said Bram B. Johnson, executive vice president for FedEx Ground, referring to the Postal Service. "They go to every single address every single day. No one else does that."
Dahl of Air Cargo Management warned that the package delivery business alone would not help the Postal Service offset shortfalls in other areas.
"If you look at the bread and butter for the Postal Service, those segments have been declining," he said. "So obviously it's to their benefit to look for other kinds of opportunities."
Potter is sanguine about the other opportunities coming his way.
"If you look back at the history of Postal Service, there's always been a threat," Potter said. "The telegraph, the telephone, the fax machine. Any new form of communication has been viewed as, oh wow, it's the beginning of the end. But I take great reassurance that the American public always seem to find new ways to use the mail."
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