For the first time in nine years, USPS has reported a loss in total package volume for the third quarter in 2019. This is a surprise to those of us keeping a keen eye on the Postal Service, since package delivery service has been the most successful part of USPS’ business for the past decade. However, insiders at USPS sensed that this trend wouldn’t last forever. Interestingly enough, the Postal Service predicted they may lose future package volume in a government filing back in 2017. Now, it seems that prophecy has come to pass.
What Caused the Loss in Package Volume?
The reason behind USPS’ loss in package volume is obvious: growing competition. Other carriers such as UPS (NYSE:UPS), FedEx (NYSE:FDX), and Amazon (NASDAQ:AMZN) have been busy building out more delivery capabilities, instead of relying on USPS for last mile delivery.
These companies will continue to absorb more and more packages into their own networks as time goes on. As a result, the amount of packages that USPS helps deliver for other carriers will decrease. The most obvious example of this trend can be seen in none other than Amazon, now that Amazon is its own biggest shipper in terms of overall package volume.
Why USPS Losing Package Volume is a Big Deal
USPS’ total package volume skyrocketed in tandem with the rise of eCommerce. In the past decade, countless small businesses have sprouted up that rely on delivering goods to customers all across America. As a result, the package delivery service portion of USPS’ business flourished. However, as their competitors keep stealing away package volume, USPS may now have reason to worry.
The bottom line here is that USPS is losing business that it can’t afford to lose. USPS is already on shaky financial footing, because of pre-funding legislation that Congress enacted in 2006. However, package delivery service has been the Postal Service’s one consistently successful product since Congress enacted this legislation. As the most successful portion of USPS’ business model continues to lose ground to other competitors, a healthy financial future for the Postal Service may slip even further away.