NACS

By Scott Orr

There are packages to be shipped, letters to be mailed, stamps to be bought, and deliveries to be picked up, so don€™t be startled by the buzz of humanity gathered in this bustling corner of the world. Commerce is proceeding apace here as customers line up to con­duct their post office business.

There€™s neat red and blue décor, a counter with a computer monitor and a scale for weighing packages, posters with tips on packaging and shipping, and a friendly face behind the counter accepting the latest additions to the na­tional mail flow. All seems normal in this postal unit €" until you notice the life-size cutout of a shirtless body builder holding a display for Xenergy, two for $4. Behind this snarling figure are shelves of snacks, coolers full of pack­aged beverages, and racks of candy and tobacco products.

Welcome to one of the Quickie Con­venience Stores in Ottawa, Canada, which has, quite literally, gone postal. Here, you can buy a lottery ticket and mail it to grandma at the same time.

Good Business Sense

Three decades after Canada Post pio­neered the idea of locating post offices in convenience stores, the United States Postal Service has announced its village post office initiative, which would set up postal units in convenience stores and other businesses at thousands of locations across the country. The USPS is hoping the program will satisfy residents in thou­sands of communities across the country that will see their local post offices closed in the coming months, as the agency un­dergoes an historic downsizing. For con­venience stores, getting involved in mail delivery could also deliver new custom­ers and profits to their business.

Corey Fitze, NACS director of govern­ment relations, has been following the is­sue for some time. He€™s convinced that, for at least some convenience stores, going postal makes good business sense. And the greatest potential for gain can be found in the thousands of small towns and rural locations that are expected to see their traditional post offices closed next year.

"As the USPS begins shutting down thousands of post offices across the coun­try, communities everywhere are going to be seeking alternatives to meet their mail and shipping needs. Convenience stores are perfectly situated to fill this void, pro­viding needed mail service to communi­ties without post offices, while at the same time gaining access to consumers who might not otherwise stop in," Fitze said.

"Like selling lottery tickets, being able to accept mail and even have post office boxes on location could greatly increase the traffic flow in stores, which will lead to an increase in ancillary sales. It€™s cer­tainly in the interest of any store to keep a close eye on their local post office and, if it is on the USPS€™s hit list for closure, there could be an opportunity there," he said.

So far, the USPS has not issued formal guidelines for how the village post office programs will work, but Fitze said he expects details to be forthcoming in the coming months as the agency moves forward with its wildly unpopular plan to eliminate traditional post offices. Expect to hear more on the program around the beginning of 2012, he predicted.

Patrick Donahoe, the U.S. postmaster general and the U.S. Postal Service€™s CEO, also recognized the opportunity the program could present to conve­nience stores during a recent Washing­ton press conference where he unveiled the village post office initiative.

"It€™s a very good opportunity for a lot of small businesses across the entire United States. If you think about it, in many small towns today you€™ve got a post office, you€™ve got a store and a gas station. And many of these general stores are hanging on for dear life out there, just with the recession and a lot of the other issues that they face. When we contract say with a grocer€¦it gives access to customers in many cases. It gives many of these small businesses the opportunity to stay open, to stay vibrant in their community. So we think it€™s a real win-win proposal," he said.

Evolve or Perish

The village post office program is part of a major overhaul of the U.S. Postal Ser­vice€™s business model, which has sus­tained billions of dollars in annual losses and brought the once proud agency to the brink of financial ruin. It€™s time, Do­nahoe said, that the U.S. Postal Service recognizes that times have changed and the agency must adapt if it is to survive.

"Think about the world today, every­body€™s on the go. I mean, it€™s not like it was years ago, where people had a routine; they€™d go the supermarket, go to the post office. Things are very different today. We€™re going 24 hours and people expect access€¦It€™s up to us to provide that ac­cess to meet customers€™ expectations in such a world of great demand. We€™ve got to be everywhere," he admitted.

By its own admission, the USPS is in sad shape. Last year, it lost $8.5 billion and has been hemorrhaging money at a rate of about $3 billion per quarter this year.

Joseph Corbett, the agency€™s CFO, said in a statement that unless Congress steps in, the U.S. Postal Service would be unable to meet its fiscal obligations this fall. To try and save itself, the agency wants to cut employee hours, end Saturday de­livery and close thousands of under-performing post offices.

The USPS, which had $67 billion in revenues for fiscal 2010, is studying 3,653 of its 32,000 post offices, stations and branches for possible closure. This, the agency predicts, will result in sav­ings of $200 million annually; certainly not enough to save the agency, but a sav­ings nonetheless. But when it released the list of post offices targeted for clo­sure in July, the agency was met with storms of protest from small-town Americans who saw the loss as a blow to the very souls of their communities.

"Post offices in a rural state such as Vermont are not just post offices, they are often the heart and soul of the town, and they must not be closed down. Many of these post offices have been in continu­ous operation for over 100 years and are an essential part of the fabric of Ver­mont€™s rural landscape," Senator Bernie Sanders (VT-I) wrote in a letter to Ruth Goldway, chairman of the Postal Regula­tory Commission. Similar sentiments have been flowing in from public officials and others on behalf of communities threatened with the loss of post offices.

At the same time, some lawmakers rec­ognize the need to cut U.S. Postal Service spending. Representative Darrell Issa (R-CA), the chairman of the House Oversight and Government Reform Committee and the author of legislation to reform the USPS, said new post office alternatives should be part of broader reform.

"The Postal Service needs to reduce ex­penses to bring them in line with falling revenue. As Congress works to solve the postal crisis, giving the Postal Service greater flexibility to expand service hours and provide lower cost alternatives for Americans to access mail must be a vital part of any reform package," he said.

Worthy Alternative

Hoping to inoculate itself from the dis­sent, the U.S. Postal Service has been holding up the village post office pro­gram as a worthy alternative to tradi­tional post offices, one that could not only maintain this precious community fabric, but in fact return small towns to an earlier time when post offices were routinely located in general stores.

Still, the U.S. Postal Service isn€™t ex­pecting convenience store operators to become local postmasters, swapping hats between merchant and postman like Sam Drucker, the frequently befud­dled general store owner on the 1960s sitcom Green Acres.

"What the village post office will do is work with small businesses in locations where they feel that we could support their needs and the customers have de­mand above and beyond our post offic­es," said Dean Granholm, vice president of delivery and post office operations at the USPS.

"We provide added foot traffic for the small business and greater sales for that office. Typically a corner store, a local general store, a grocery store or a gas station may become a village post of­fice," Granholm said, apparently failing to realize that all of those types of opera­tions are, or can be, convenience stores.

The U.S. Postal Service predicts that more than 2,500 village post offices may be created in the next year, but so far it hasn€™t spelled out the exact details of how the program will work other than to say it will go beyond the agency€™s existing con­tract postal unit plan, which allows retail operations to sell stamps and provide certain other postal services. One thing the agency has made clear it is looking for, however, are businesses that stay open long hours.

"If you look at the customer benefits, which is most important, customers [will be able to] purchase stamps and mail our flat rate products with expanded access typically seven days a week up to 10, 12, 14 hours a day, far greater than what we serve today. They€™re also located in convenient locations in their same town and they get a better customer experience in these locations because they€™re already shopping in these locations one, two, three days a week," Granholm said.

A Big Draw

If the program turns out to be anything like the one featured in the Ottawa con­venience store example, a postal outlet will be a significant asset to most any con­venience store. That€™s the prediction, at least, from Arnold Kimmel, CEO and founder of Quickie Convenience Stores in Canada. He should know €" he has had postal operations in his stores since 1982.

"In Canada, in major urban areas there are post offices, but in smaller towns there aren€™t as many. To make it more convenient for people living out­side urban centers, Canada Post went to opening outlets in private businesses 30 years ago. It proved to be very success­ful," Kimmel said.

There are indications that the USPS plan may not be as ambitious as the one rolled out in Canada, where satellite post­al units are manned by convenience store employees who are empowered to offer 100 percent of the services offered at regu­lar post offices. Still, despite the wide range of services offered, Kimmel says the Canadian convenience store postal opera­tions are not profit centers for the stores.

"On its own, at best, it€™s a break-even proposition, so we are not necessarily making money on it directly. What does happen is that the draw into the stores is significant. It is good for the convenience store, especially in small towns where there aren€™t any regular post offices around. There is no doubt that they can greatly increase traffic into the stores; af­ter that it€™s up to us make that additional sale," Kimmel said.

Kimmel added, however, that compe­tition for postal operations has been in­tense in Canada with convenience stores and drug stores fighting it out for the prize contracts. American convenience store operators should be prepared for the same, he said.

Still, Kimmel said he has little doubt that establishing postal units in U.S. con­venience stores will benefit the industry. "I don€™t know the details of the USPS plan, but I can tell you it has been a big winner for us. I see no reason why it wouldn€™t be the same in the U.S.," he said.

Scott Orr is a freelance writer based in Washington, D.C.