Offering volume incentives is a common business practice in the U.S. and around the world. Although the U.S. Postal Service offers incentives to businesses that presort their mail, the agency does not offer incentives based strictly on the volume of packages shipped. One reason might be that offering volume incentives would lower the profit margin on each package shipped; yet, the potential volume increase of items shipped would make up for the smaller profit margins.
E-retail is a multibillion-dollar industry through which millions of transactions are made via clearinghouses, such as Amazon.com and eBay. The e-retail industry continues to grow and includes on-line sales in virtually every industry. In the U.S., online retail spending for the Q4 2010 reached a record $43.4 billion, up from $39.0 billion in Q4 2009. This accelerated growth rate represented the fifth consecutive quarter of positive year-over-year growth and second quarter of double-digit growth rates in the past year. This trend will likely continue as more online people turn to the internet for their shopping needs, and younger, digital-savvy generations increasingly flex their spending power. Companies like eBay, Amazon.com, and traditional retailers with strong web operations should continue to benefit from this growth.
Increases in e-shopping means an increase in the quantity of goods shipped is also increasing. Most vendors have their preferences, which are frequently based on cost. Should the Postal Service take advantage of the increased amount of shipping generated by e-retailers by offering incentives?
Yes or no, and why?
This blog is hosted by the Office of Audit’s Financial Reporting Directorate.