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Direct Marketing » Tips & Facts, Country Focus | 28.05.2015

Is America's postal system dying?

As it reports another huge loss, analysts and media pundits are once again asking if there's a future for the beleaguered United States Postal Service, which for years now has been losing billions of dollars in an intense domestic and international mailing market dominated by giants such as DHL, FedEx and others.

USPS announced a net loss of US$1.5 billion for the fiscal second quarter, from January to the end of March 2015, as operating revenues rose by $223 million compared to the same time a year ago. The big loss comes at a time of increased package volume being handled by the government agency, however – a total growth of 14.4% in such deliveries.

In the second fiscal quarter, USPS handled 37.7 billion items of mail, which is a drop of 420 million items on the same period a year earlier. First-class mail was down 2.1% and standard mail experienced a decline of 1.1%, the agency said. As of the announcement of its financial results, USPS had just 22 days of operating cash available, amounting to some $6.1 billion.

The loss is bad news for the agency, of course, but there's one bright spot – a very small one: it was about $400 million less than the same time in 2014. As mail volumes continue to decline, due to the prevalence of email and messaging services, USPS has been targeting the e-commerce delivery sector and last year gained regulatory approval to slash its prices by up to 58% for large customers, notably e-commerce firms.

USPS chief financial officer and executive vice president Joseph Corbett said in a note accompanying the financial results that investment would be required to upgrade the agency's delivery system, in order to better compete in a highly competitive e-commerce delivery environment.

"Shipping and package services are a key business driver. However, operating margins in this business are lower than in mailing services," he said. "And, while we're pleased to see a small increase in controllable income, to improve our margins, we'll need to make investments in our network infrastructure and delivery vehicles."

With enormous losses mounting – the agency lost a record $15.9 billion in 2012 – it will surely take an enormous effort to breathe new life into this struggling operation.