News Item: USPS Buys FedEx
MAKING ANOTHER MOVE IN ITS BID TO BECOME ONE OF the nation’s largest — and most profitable — companies, the U.S. Postal Service acquired the $29 billion company once considered its prime competition.
John J. Morgan, head of the now-independent postal service, believes “that, for continued growth, we must strongly go global and FedEx, which serves over 200 countries, is one critical step in that direction. In celebration of this partnership and our new abilities, the U.S. Postal Service will now be called USDS, the U.S. Delivery Service.”
The direct marketing industry was stunned and thrilled when President Hillary Clinton unexpectedly won the support necessary to allow the postal service to privatize in 2010. Just seven years later, Mr. Morgan has managed to turned this postal entity around. He began by successfully negotiating a rational labor contract that followed Deutsche Post’s example of “treating unions like partners, not enemies.” With a reduced but sound base of contented employees, USDS immediately took steps to overcome the bottom-line-draining effects of increased Internet use on areas that once were revenue producers.
After the initial privatization, USDS’ first acquisition was National City, a $140 billion financial institution. “Most thought we would immediately want to purchase a company like FedEx to add to our delivery capabilities. But we knew we had to first correct what had been a less-than-stellar performance in postal mail delivery before adding another delivery business. Instead, we went for a firm we felt would produce the kind of income we needed to fund all the improvements we planned to make to mail delivery,” says USDS spokeswoman Shannon O’Toole.
From all indications, this strategy has worked. USDS completed its last payment to the U.S. Treasury (the privatization included an agreed-to amount for the acquisition of the post office, to be paid over an extended period). Mail delivery itself has improved: Some 97.3% of first class mail is delivered within 24 hours, and about 90% of business class in three days. And there hasn’t been a rate hike in the last five years.
“We have no plans to raise rates in the future,” says Ms. O’Toole. “In fact, we hope to be able to cut rates for our loyal business customers in direct marketing, as we believe our future is clearly tied to them.”
A lovely dream, you say. Too farfetched to be even remotely believable? Not if you’ve followed what’s been happening at Deutsche Post World Net and elsewhere over the last 10 years or so.
From “a lousy German mail company with lousy quality and huge losses,” according to CEO Klaus Zumwinkel, Deutsche Post has become a publicly traded firm with 2004 revenue of $53 billion and an operating profit of $4 billion, according to the Financial Times.
The first step was labor negotiation and reduction over a 10-year period. Next…a majority share in Postbank A.G., the largest single institution in the German retail banking market, as well as DHL (acquired in stages from 1998) and Airborne Express (bought in 2003).
Global marketing was the major motivator for the purchases of DHL and Airborne, but Deutsche Post has many more fingers in the global pie. Besides the aforementioned companies, Deutsche Post owns Global Mail, Smart Mail Services, and Air Express International in the United States. Further, the company has multiple properties in the United Kingdom, the Netherlands, France, Sweden, Italy, Switzerland, Hong Kong and Japan.
TNT, the Dutch post office previously called PTT Post, has been privatized since 1989 and, as the Financial Times reports, has an impressive 22% to 25% return on sales. This return (in spite of an anticipated 30% loss in volume due to the Internet) is intended to be maintained by staffing more than half the delivery force with part-time employees who cost less and do a better job than full-timers, at least as TNT’s experience has shown.
TNT is the mail service that really does get 97.3% first class mail delivery within 24 hours (granted, Holland is a tad smaller country). One form or another of this firm operates in 63 nations. And since 2003, it’s had a strategic partnership with China Post.
Now here in the United States — where we’re still bumbling along trying to determine what, if anything, is needed to transform the USPS into a real business — the White House wants postal reform to come at no cost. The postal service would prefer to leave things exactly as they are.
And what are mailers doing to help the USPS become our self-sustaining, even profitable version of Deutsche Post, rather than the current entity that feels it must repeatedly raise rates just to keep its head above water?
Ask yourself: When is the last time I talked to my representative in Congress or senator about how important my catalog or other direct marketing business is to the economy? What makes you think your government reps will go to bat over postal issues that are favorable to the health of your business if they don’t have a clue you even exist?
Meeting face-to-face with these people and helping them understand your business is probably the single most powerful weapon for curbing postal rate increases we have. Yet the majority of us sit on our hands. And no, sending your printer or another supplier to meet with them is not the same. You need to go. It’s your presence that can make an impact, not just someone trying to be a good vendor. Believe me, politicians understand the difference.
Don’t know how to get started? Talk to the experts: Gene A. Del Polito, president of the Association for Postal Commerce, at 703-524-0096 or [email protected]; Jerry Cerasale, the Direct Marketing Association’s senior vice president for government affairs, at 202-861-2423 or [email protected]; and Mark Micali, DMA vice president for government affairs, at 202-861-2422 or [email protected].
KATIE MULDOON ([email protected]) is president of DM/catalog consulting firm Muldoon & Baer Inc., Palm Beach Gardens, FL.
