• on May 25th, 2015 in Ideas Worth Exploring | 1 comment

    The U.S. Postal Service is best known for delivering the mail. But did you know it’s also the number one seller of the most widely used type of alternative financial service in the United States? We’re talking about money orders, which function like prepaid checks. The Postal Service sold a whopping 97 million of them with a face value of $21 billion in fiscal year 2014.

    The Postal Service also offers international money transfers, prepaid gift cards, and limited check cashing. From 1911 to 1967, it even offered savings accounts through the Postal Savings System, which prompted millions of Americans to move a portion of their nest eggs from under the mattress into savings accounts.  

    In our recent white paper, The Road Ahead for Postal Financial Services, we explore how the Postal Service could expand its financial offerings to benefit Americans and generate much needed new revenue. (This is a follow-up to our January 2014 paper, Providing Non-Bank Financial Services for the Underserved.) We hired financial consultancy Mercator Advisory Group to help us look at the pros and cons of several different approaches the Postal Service could take. But we dove deepest into what it probably is allowed to do under current law; namely, beef up and improve existing products and expand into adjacent, related services like payroll check cashing, domestic electronic money transfers between post offices, and walk-up bill paying. Our analysis shows that – assuming Postal Regulatory Commission approval – a suite of these potentially allowable products could, after a 5-year ramp-up, bring in $1.1 billion in annual revenue while covering costs and contributing profits.

    We welcome your input. 

    • Should the Postal Service look at new business lines that are not directly related to mail and delivery?
    •  Which financial products do you think the Postal Service should provide? 
    • What do you think are the biggest barriers to success in postal financial services?  
  • on May 18th, 2015 in Mail Processing & Transportation | 2 comments

    With all those designer shoes, cutting-edge electronics, and trendy toys shipping into our homes via ecommerce, it’s only logical that sometimes the shoes won’t fit, the electronics won’t work, and the kids will have already moved on to the next hot toy.

    The bottom line is that some of the stuff we buy needs to be returned. And that’s known as reverse logistics.

    As the offspring of the enormous ecommerce business, domestic shipping returns currently generate about $3 billion annually in revenue for the package delivery industry, and could reach $4 billion by fiscal year 2016. Shipping returns’ first cousin, package forwarding, is also booming as customers increasingly expect more control over when and where their packages will be delivered.

    This trend certainly isn’t lost on the industry. FedEx, for example, expanded its reverse logistics prowess with its $1.4 billion purchase of GENCO Distribution System Inc., a third-party logistic provider. And Britain’s Royal Mail is so interested in reverse logistics that it even did a study that profiled the types of people who frequently return online purchases. (Turns out there are four: the returns addict, the duplicate dealer, the bargain hunger, and the swap shopper.)

    The U.S. Postal Service also is active in the returns and forwarding markets, and offers a variety of products and services, such as Parcel Returns Service, Bulk Parcel Return Service, and two Premium Forwarding Services – one for homes and one for businesses. Recently, the Postal Service has been promoting its built-in advantage over other providers – its 6-day-a-week delivery and its free package pick-up service.

    But can it do more to get its chunk of the reverse logistics market? We think so. Our recent white paper on the topic found several services the Postal Service could offer to take advantage of its strengths. First, it could consider providing digital parcel labels to the growing crowd of smartphone users. With this technology, the customer notifies the merchant of a pending return, the merchant sends a quick response (QR) code to the customer’s phone, the customer then schedules a carrier pickup, and the carrier scans the QR code, prints a label from a handheld device, and takes the package.

    Next, warehousing is a big piece of the logistics business as many small businesses lack space to house the products they ship to customers. We suggested the Postal Service put its excess facility space to good use by offering shipping and return services to businesses that have combined inventory storage and shipping needs.

    Finally, the Postal Service could offer customers an alternative delivery option in which they could pick up purchases at any of the 32,000 post offices. This would appeal to those who want packages sent to a location of their choosing, rather than wait for the item at home or work.

    Are you a frequent returner? What do you look for in returns service? What could the Postal Service do to ease the return or forwarding of goods?

  • on May 11th, 2015 in Ideas Worth Exploring | 3 comments

    The story goes that Alibaba founder Jack Ma chose his company’s name for two reasons: He wanted to be ahead of Amazon alphabetically and he wanted a global-sounding name. It didn’t hurt that some people also associated the word Alibaba with “hidden treasure” – recalling the most famous story from The Arabian Nights.

    Alibaba is China’s giant ecommerce platform that is now taking on the globe. Its September 2014 initial public offering in the United States was the largest ever, and Ma has signaled his interest in expanding here.

    Unlike Amazon, Alibaba doesn’t actually sell any goods; rather, it connects buyers and sellers. Its three main websites are Alibaba.com, which links Chinese exporters with companies around the world; Taobao.com, China’s biggest shopping site; and Tmall.com, a website of select branded goods targeted primarily to China’s middle class. Alibaba also offers a Paypal-like service called alipay.com.

    Some experts predict Alibaba could soon be the largest retail platform in the world. With 330 million active buyers, it is the fastest-growing ecommerce company in the fastest growing market in the world.

    So, what does all of this mean for the logistics and delivery markets? Well, a lot. Postal operators and private carriers are all trying to get in on Alibaba’s action. Last year, Alibaba bought a minority interest in Singapore Post and it signed an agreement with China Post to share facilities and resources to beef up delivery in China, especially in remote areas. Royal Mail recently announced it was joining Tmall.com to boost trade for its overseas parcels business.

    And Amazon, not one to reject any opportunity to expand its reach, is also joining the party. It just opened a store on Tmall.com.

    So, where might the U.S Postal Service fit in here? Do you see an opportunity for the Postal Service to partner with Alibaba? And what if Alibaba expands aggressively in the United States? How could the Postal Service position itself to be a player in that expansion?

     

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