Domestic Shipping is Up… But for How Long?
The U.S. Postal Service has announced its financial results for the 2021 second quarter and reported a net loss of $82 million, on total revenue of approximately $18.9 billion. This is a big improvement from the $4.5 billion net loss that was reported for the same quarter last year, amidst the COVID-19 pandemic.
The growth in online shopping over the last few months has been beneficial to the USPS, who reported a total revenue increase of approximately 6% compared to the same quarter last year. What is unclear though is how long the Postal Service will continue to experience the current growth in domestic volume.
International Volume Drops Significantly
The USPS has experienced a significant volume drop in international shipments, for both import and export parcels. Clearly, international operations were more impacted than domestic operations, due to the lack of flights and the various restrictions put in place by foreign countries. But the real culprit could be the recent decisions made by the Postal Service, along with a huge mid-year price change in 2020.
The import business volume dropped 58%, with a reported 22% decline in revenue. This is not surprising as the Postal Service announced in 2019 that they would be charging importing postal operators new rates based on the cost of domestic shipping. The price increase has forced postal operators to find alternate ways of getting low-cost shipping into the U.S. and has surely led to the volume decline. The higher rates were not able to sustain the volume drop and the USPS is reporting negative revenue growth over 2020 year to date.
The export business is a bit mixed with a reported 9% growth in revenue, and a 22% volume decline. The key metric to look at here is the volume decline. The USPS had to raise their rates mid-year in 2020 due to the retaliation by foreign postal services on USPS exports from their pricing increase on USPS imports. In April 2020, the Postal Service was notified by foreign postal operators of their new rates and subsequently the USPS levied a huge price increase on their wholesale business in July 2020. Those higher rates are helping prop up USPS revenue for now, but continued volume decline at this rate will most surely mean that they will struggle to maintain revenue growth going forward.