Winners and Losers From the End of Saturday Mail Delivery

Think FedEx and UPS will gobble up business? Not exactly.

   
Winners and Losers From the End of Saturday Mail Delivery

After a couple of years of talking about it, the United States Postal Service is finally pulling the trigger. As of Aug. 5 of this year, the USPS won’t be making letter deliveries on Saturdays for the first time in decades.

It’s one of several measures the government’s postage organization is taking in an effort to avoid another $16 billion loss like it booked in 2012. It won’t be enough — axing Saturday mail drops will only save about $2 billion per year — but it’s a start, and every overhaul has to begin somewhere.

Of course, consumers and corporations that have relied on Saturday deliveries are already asking questions. Although none of them can be fully answered until the time comes, we still have some things to gnaw on between now and then.

Who Loses?

The most obvious losers in this deal are also the biggest losers — organizations that had built a business on Saturday’s mail drops. These are mostly weekend-oriented magazines, but there are a lot of them, including Time, The Economist and The Week.

It’s not just magazines, however. Many smaller (and often weekly) newspapers have found that it’s cheaper to simply mail the paper to subscribers than it is to hire a paper carrier.

Don’t look for any of those publishers just to close shop. They’re going to restructure their printing times and likely retrain their readers. The content itself might also shift … away from “breezy” and timeless to newsy and quick, since competition for attention varies throughout the week. Some readers might not make the adjustment.

Then there are the 22,500 letter carriers that will likely be dismissed. The carriers’ union has already expressed dissatisfaction with the decision, though there’s little legal support for their case to maintain Saturday deliveries.

Perhaps the hardest-hit group, however, are those smaller community newspapers that not only deliver a paper via the mail on Saturday, but also rely on revenue generated by adding coupons and ad packets that are specifically requested to be delivered on a Saturday. Now these community publishers are looking to hire their own Saturday delivery folk.

Who Wins?

The knee-jerk reaction would put for-profit delivery names FedEx (NYSE:FDX) and UPS (NYSE:UPS) at the front of the line for picking up revenue that the U.S. Postal Service is dropping. But that’s not quite the case. The Postal Service still will deliver packages on Saturdays; the cutback only ends general mail delivery … letters with stamps and the like.

In some cases, print publishers that also create an online version of their publication might find a renewed wave of interest in their digital version. Time magazine, for instance, offers more content online — and sooner — than it does with its printed publications.

No, the only real winner here is the USPS, and even that’s a relative victory. It might save a couple billion bucks a year, but it’s still in a pinch, and it isn’t getting any real help from Uncle Sam.

Who Doesn’t Really Care?

Surprisingly enough, this appears to be the biggest group of the three.

In polls before and after the Saturday cuts were made official, about 70% of consumers supported the measure. That’s not to say it was their preference, but most of them acknowledged that receiving mail on a Saturday wasn’t critical. After all, even important business-related mail generally can’t be acted on until the following Monday anyway.

Some have opined that the $1 trillion direct-mail marketing industry is also going to suffer. That’s a stretch to say the least. Nearly all of these organizations use the much cheaper standard mail service, which costs considerably less than first-class mail and can be delivered anywhere from nine to 11 days after the USPS gets the pieces. There’s never been a guaranteed delivery day on these pieces, and some of these marketers like Valassis Shared Mail specifically aim for a midweek drop.

Another surprising organization that doesn’t care, even though it does a great deal of the post office’s heavy lifting (literally and figuratively): FedEx.

Not only does the United States Postal Service regularly tap FedEx to move mail from point A to point B, the post office is actually FedEx’s biggest customer, generating more than $40 billion per year in revenue for the for-profit delivery service. So why isn’t FedEx worried? Again, the post office isn’t dropping package delivery on Saturdays, and it still intends to move as much stamped or metered mail as it did before. It just won’t be needing those services from FedEx leading into the weekend. Those planes, pilots, trucks and drivers will simply be doing the same amount of work at different times during the week.

The Last Word

While the end of the Saturday-delivery era should have come as a surprise to no one, it still seems to have caused quite a stir once it became official. Bluntly, though, it’s not that big of a deal.

While the direct-mail marketing industry has something of a legitimate beef, marketers and consumers always seem to find a way of connecting. It shouldn’t take more than a few weeks for those advertisers to find another suitable time and/or way to get themselves in front of potential customers.

As for everyone else, we’ll be adjusted to it by the end of August.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, http://investorplace.com/2013/02/winner-and-losers-from-the-end-of-saturday-mail-delivery/.

©2014 InvestorPlace Media, LLC

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