18 DC VELOCITY MAY 2015 www.dcvelocity.com
newsworthy
The U.S. Postal Service (USPS) is testing a program to provide fulfillment services to small to mid-sized e-commerce
businesses, a move that could expand USPS’s offerings
beyond the handling and delivery of mail and allow it to
join the ranks of global postal systems that have long since
expanded into nontraditional segments.
USPS has repurposed space in a facility outside Chicago
where it is “conducting an operational test to determine
the feasibility of providing pre-staged warehousing delivery
services for third-party companies,” according to Sarah A.
Ninivaggi, a USPS spokeswoman. In a statement to DC
VELOCITY, Ninivaggi said the initiative allows USPS to
“explore a new way of providing value and convenience for
consumers by taking advantage of our existing processing
and delivery network” and to “respond to the changing
needs of consumers while enhancing the overall delivery
experience.” The pilot program began several months ago,
she said.
Details of the program are unknown. However, USPS
may be following a template laid out by the quasi-govern-mental agency’s Office of Inspector General (OIG), which,
among other duties, serves as a de facto marketing adviser.
In two reports, one issued in February 2014 and the other
this January, the OIG suggested several ways the USPS
could expand its value proposition and capture more of the
business-to-consumer traffic being driven by e-commerce’s
phenomenal growth.
The OIG proposed that USPS pursue the market for
“continuity shipping,” where online orders automatically
get replenished and shipped on a repeat basis. Mail-order
pharmaceuticals, cosmetics, pet supplies, and beer and wine
would be ideal candidates for this form of shipping, and
USPS, as a parcel carrier, would be well positioned to advise
e-merchants on fulfillment and delivery solutions, the OIG
said. It pegged the continuity shipping market at about $7.6
billion in calendar year 2014, or 2. 5 percent of total U.S.
online sales. The market could grow 30 to 40 percent annu-
ally over the next five to 10 years as repeat online customers
transition to new subscription services, the OIG said.
“Continuity shipping is an established and growing
segment of the retail industry, and an integral part of the
e-commerce fulfillment world,” the OIG said.
The Postal Service could start by offering “competitively
priced basic fulfillment services, while developing expertise
in other e-commerce supply chain areas, such as logistics,
warehousing, inventory management, product shipping,
and traceability,” according to the OIG. USPS’s 248 million
square feet of excess facility space, which has ballooned as
the agency has trimmed its physical footprint in a bid to
reduce costs, could be converted into warehousing and
fulfillment space, the OIG said.
Based on low-end demand assumptions, USPS could
generate about $164 million in revenue from the service in
about two years and post a net profit of about $5.7 million
by that time, according to OIG estimates.
INTERNATIONAL EXPANSION?
Another segment that USPS should more fully explore is
international mail forwarding (IMF), which allows foreign
customers to remotely manage their U.S. mail, OIG said.
IMF companies assign foreign customers a U.S. mailing
address and offer various services for mail shipped to that
location. When a customer’s mail arrives at the assigned
U.S. address, the IMF company captures a digital image
of the pieces and loads it into the customer’s account. The
vendor sends an electronic message notifying the customer
of incoming mail. The customer can then direct the vendor
to discard the mail, hold it, open it and digitally scan its
contents, or consolidate it with other mail to be shipped to
the customer’s international location.
Currently a $1 billion-a-year market, demand for IMF is
expected to grow exponentially as e-tailers such as Amazon.
com and eBay bolster their international presence and foreign buyers become increasingly interested in U.S. goods
and services, the OIG said. Based on U.S. online purchase
sites, there are more than 2 million potential IMF customers, it estimated.
Overall, the international shipping industry is growing
about 8 percent annually, from $2 billion in 1990 to $12
billion in 2013, according to OIG estimates. USPS has been
losing ground in international shipping, a situation that
broader exposure into the IMF segment could help reverse,
OIG said.
BRANCHING OUT
The OIG proposals underscore the growing need for the
USPS to explore ways to leverage its formidable resources
beyond the handling, processing, and movement of mail.
USPS testing e-fulfillment services for small, mid-sized merchants
Ceva Logistics has opened a 1,600-square-meter
( 17,222-square-foot) distribution center for automotive
company Magneti Marelli’s After Market Parts and
Services division in Padua Interporto, Italy. … Reusable
asset management provider reLogistics Services has
opened a new reverse logistics center in Fontana, Calif.
… Hanover Logistics, a third-party logistics service
company, has purchased the former Delia’s distribution
center property in Hanover, Pa.
ground breakers
