The United States Postal Service (USPS) saw package volumes decline by 47 million pieces in the third quarter, a 3.2% drop compared to the same quarter a year ago, according to the agency’s Q3 earnings report. This is the first volume drop in nine years.
While the Postal Service has experienced financial losses for the past few years, the volume drop is in part “a reflection of industry in-sourcing of last-mile delivery Parcel Select,” David Partenheimer, a media relations manager at USPS. This suggests attempts by Amazon, FedEx and UPS to court customers with more delivery options and, in Amazon’s case, deliver its own packages, is beginning to take its toll in earnest.
USPS has tried to compensate for declining revenue by raising prices. For this reason, it saw Shipping and Packages revenue grow by 4.8% despite declining volumes.
The Postal Service’s operating costs are continuing to rise faster than incoming revenue. USPS’ “constrained business model … is ill-suited to ensure [its] long-term sustainability,” Brennan noted in the Q3 report.
According to USPS Chief Financial Officer and Executive Vice President Joseph Corbett, this is driven by its universal service obligation, which requires USPS to deliver anywhere in the United States, including remote locations that are more expensive and resource-intensive to reach and that other carriers are not obligated to service. To account for this cost, Corbett said “we reduced work hours by approximately 1.7 million relative to the same quarter last year,” according to the press release.
Package volumes as a whole, particularly e-commerce packages, are increasing year over year. The Postal Service’s problem is the packages are being shipped via other private-sector carriers or, more recently, by Amazon itself.
Amazon’s move in particular has shaken up the industry, with FedEx and UPS transitioning to seven-day-a-week delivery year-round and faster shipping options.