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Firms assess effect of Postal Service shift to 5-day delivery

Hallmark says the end of Saturday mail delivery would have broad negative effects, while Amazon expects no problems for itself. Shares of other shippers rise.

February 06, 2013|By W.J. Hennigan, Los Angeles Times
  • Package delivery will continue on Saturdays, but the U.S. Postal Service will begin a five-day mail delivery schedule in August.
Package delivery will continue on Saturdays, but the U.S. Postal Service… (Chris Carlson, Associated…)

Hallmark is worried about the end of Saturday mail. Amazon.com, not so much.

Across the business world, merchants, delivery services and mass mailers of all kinds were assessing the effect of no weekend delivery of first-class mail possibly starting this summer.

The U.S. Postal Service said it made the announcement Wednesday — about six months in advance of implementing a five-day mail delivery schedule in August — to give residential and business customers time to plan and adjust. The plan is subject to congressional approval.

On Wall Street, United Parcel Service Inc. and FedEx Corp. saw gains, as did big mailers such as Netflix Inc.

But another company with a stake in the U.S. mail, Hallmark Cards Inc., the Kansas City, Mo., greeting card company, was quick to say it anticipated problems with the decision.

"Hallmark continues to believe a reduction in service will not induce customer loyalty and will negatively impact small towns and small businesses that depend on timely, affordable, reliable mail delivery," the company said. "This move should only be considered once all other cost-saving options are fully explored and acted upon."

Online retailer Amazon.com said it was not worried about the announcement's effect on its business.

"We use multiple carriers in all of our geographies to ensure we are delivering products to customers on time," said Scott Stanzel, a company spokesman.

Netflix, the Los Gatos, Calif., DVD-by-mail company, would not comment on the announcement but has said in the past that it needs to have a healthy postal service.

But the Postal Service's planned shift to five days of home delivery a week may make Netflix slightly more profitable by lowering the costs of sending out its familiar red envelopes with DVDs. That's because subscribers may end up receiving fewer DVDs for the same monthly price.

That's why investors reacted positively to Wednesday's announcement that the U.S. Postal Service intends to stop Saturday home delivery beginning Aug. 10. Netflix's stock Wednesday gained $10.02, or 6%, to $184.41. Earlier in the session, the stock hit a 16-month high of $185.14.

The Postal Service's announcement came with a proviso: Six-day-a-week delivery of packages will continue, enabling the agency to stay competitive with other carriers, Postmaster General Patrick Donahoe said.

The Postal Service said there has been recent strong growth in package delivery — a 14% increase since 2010. It projects continued growth in that service through the coming decade as an increasing number of big retailers join online companies such as Amazon in selling their wares online.

"Our customers see strong value in the national delivery platform we provide, and maintaining a six-day delivery schedule for packages is an important part of that platform," Donahoe said. "As consumers increasingly use and rely on delivery services — especially due to the rise of e-commerce — we can play an increasingly vital role as a delivery provider of choice, and as a driver of growth opportunities for America's businesses."

Wall Street's reaction was a bit of good news for other delivery services: UPS shares climbed 11 cents to $80.91. FedEx shares rose $1.10 to $106.17.

In a statement, FedEx spokesman Jess Bunn said: "While it is too early to say precisely what the eventual impact to FedEx would be from the U.S. Postal Service's proposed Saturday delivery changes, it appears the effect would be minimal. FedEx has an outstanding business relationship with the USPS, both as a customer and a supplier, and looks forward to its continuation."

william.hennigan@latimes.com

The Associated Press was used in compiling this report.

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