Saturday, June 20, 2015

USPS Grocery Delivery Coming to the Big Apple

Postal workers may begin early-morning delivery of groceries for Amazon in the New York metropolitan area by the end of this month.

Amazon grocery totes awaiting USPS delivery
The U.S. Postal Service filed a statement with the Postal Regulatory Commission on Thursday saying it “intends to expand the Customized Delivery market test to the New York City metropolitan area, on or shortly after June 29, 2015.” The USPS market test of grocery delivery on behalf of Amazon started last fall in the San Francisco area and spread to San Diego early this year.

Amazon’s “AmazonFresh” delivery service is already available in parts of New York City, with a fast-delivery promise: “Place your order by 10am and have it by dinner, or by 10pm and have it by breakfast.” And it already has an apparent pricing advantage in the Big Apple, undercharging three rival grocery-delivery ventures by at least 17%, according to a Nomura Securities International study.

The Postal Service will presumably take on some of those early-morning deliveries. It has told the PRC that its market test involves having non-career city carrier assistants deliver to a customer-designated location between 3 a.m. and 7 a.m. “without disturbing the recipient.”

The agency is already testing or about to test other rapid-delivery services in New York involving fresh fish, bottled water, and cut flowers.

Despite some objections about unfair competition with private enterprise, the PRC in October authorized a two-year test of Customized Delivery. But it has not acted on the Postal Service’s request to remove a $10 million annual revenue cap on the program.

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    Monday, June 8, 2015

    USPS's Court Victory Could Cost Mailers Billions

    July 30, 2015 update: The PRC went with the Postal Service's minimum -- $1.2 billion (or $1.191 billion, to be exact). The USPS will collect that amount from mailers via an extension of the exigent surcharge. That means the surcharge is slated to expire somewhere around April 2016 instead of August 2015. But remember that, in Washington, "temporary" taxes tend to become permanent.

    Despite news reports to the contrary, the only thing clear about Friday’s appeals court decision on postal rates is that the U.S. Postal Service won and mail-dependent industries lost.

    Worth 49 cents -- or 47?
    Sure, the Postal Service didn’t get everything it asked for – namely, making the 4.3% exigent surcharge permanent. But a ruling that is likely to bring in more than a billion dollars, at the expense of mailers, can hardly be called a loss for the USPS.

    As detailed in an article I wrote today for Publishing Executive (See Get Ready for Roller-Coaster Postage Rates.), the one thing the federal judges didn’t like about the current surcharge is the “count once” rule for determining how much the recent recession cost the Postal Service.

    They court sent the Postal Regulatory Commission back to the drawing board to come up with what could be called a “count multiple times” rule.

    Minimum cost: $1.2 billion
    If the count-once rule is transferring “only” $2.8 billion from mailers to the Postal Service via the surcharge, we can only imagine what the “count many times” rule will do given that the recession lasted several years.

    The Postal Service said today the additional amount is a minimum of $1.2 billion. That's the equivalent of about 8 months of the current 4.3% surcharge. And postal officials will argue for a much larger amount.

    Some writers assume that, instead of allowing the surcharge to expire this summer, the PRC will just leave it in place until it brings in enough money to satisfy the “count many times” rule. Or that, as the Postal Service requested today, the PRC will at least leave the surcharge in place until the new revenue target and surcharge are approved.

    But it’s not necessarily so simple. Unlike the appeals court judges, the PRC commissioners are no doubt aware that canceling the surcharge and then reinstating it weeks later would be disruptive for both the Postal Service and for mailers. (Just think of the public’s confusion if the price of Forever Stamps drops to 47 cents and then bounces back to 49 cents only a few weeks later.)

    But the commissioners have to proceed cautiously and allow for due process, especially given the propensity of both postal officials and mailers groups to appeal PRC decisions regarding exigent rate hikes. They will have to wade through reams of mind-numbing econometric analyses before arriving at a revenue target for the new surcharge.

    They may not be able to finish their work before the current surcharge expires. And even a perfectly reasonable assumption – that the USPS will not be overcompensated if the current surcharge is left in place until the details of “count many times” are worked out – may be open to legal challenges.

    Nothing, by the way, says that the new “count many times” surcharge has to be 4.3%: The PRC could decide to make it higher so that the Postal Service is fully compensated for its recession losses in a timely manner.

    And when the new “temporary” surcharge is supposed to expire, Congress might decide to make it permanent as a way of dodging real postal reform. I’m reminded that, back in January, my fortune-telling friend Madame Marie predicted that the surcharge would not disappear this year, adding this gem of political science: “What, you think I have crystal ball or something? All I know is, don’t ever bet on government getting rid of a temporary tax or fee.”