How Cutting Saturday Post Office Delivery Could Affect Your Portfolio
James Dennin, Kapitall: The US Post Office is thinking of eliminating Saturday service to control costs. This is actually a pretty big deal.
As you peruse the news for important market events, the actions of the US Postal Service don't always draw your attention. However, this holiday season it was the public sector who took home the prize for prompt deliveries – tackling a spike in volume of 19% and delivering over 75,000 packages on Christmas Day. Reports of delayed or damaged deliveries were negligible, a sharp contrast from the USPS's private sector competition.
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If you were following the madness, then it probably wouldn't surprise you to hear that a lot of important business relies on the Postal Service. Even before private companies like UPS (UPS) and FedEx (FDX) dropped the ball, e-commerce companies like eBay (EBAY) continued rely on the post office to deliver up to 85% of their products.
And yet the US Postal Service is still facing huge budget cuts that jeopardize its day-to-day operations, a problem that's being exacerbated by continuing cuts from the sequester. To close the gap, the USPS has proposed eliminating Saturday service, an option that's currently being debated by Congress.
Why should you care?
Because e-commerce does, not to mention a lot of other people. From consumer goods like gift cards and flowers to the entire financial services industry, a lot of people rely on the cheap and reliable services provided by the local post office. It isn't just e-commerce giants like eBay.
For instance, many people now have their prescriptions delivered by services provided by CVS Caremark (CVS) and ExpressScrips (ESRX), delivering millions of medicines to their customers every weekend. The Post Office cannot go through with the action without approval by Congress, and is pursuing many other options to cut down on its debt, including selling itself outright.
Many investors will want to pay close attention to the situation as it develops. If all of these industries had to start relying on the private sector to provide mail and delivery services, it could send shipping costs through the roof, which would pinch everyone come earnings season.