E-commerce costs USPS

Instead of making money, e-commerce initiatives have required subsidies from other Postal operations

E-commerce ventures that the U.S. Postal Service expected would generate $104 million in 2001, produced less than 1 percent of that amount in the first three quarters of the fiscal year, the General Accounting Office reports.

Instead of making money for the Postal Service, the e-commerce initiatives have required subsidies from other USPS operations, GAO reported to Sen. Thad Cochran (R-Miss.).

Cochran and other members of Congress have questioned whether the Postal Service should be involved in e-commerce.

Initially, concern focused on whether the Postal Service is inappropriately competing with private businesses involved in e-commerce. But increasingly, the concern is that USPS, which rang up a $1.7 billion operating loss last year and $5 billion in losses related to the terrorist and anthrax attacks, is losing still more money through online services.

The Postal Service operates five e-commerce initiatives:

* An online billing and bill paying service.

* Secure e-mailing.

* E-mail that is printed and delivered in paper form.

* Certified e-mail delivered in paper from.

* Electronic sales of greeting cards.

The Postal Service has several other online services but contends that they are just extensions of traditional services and are not e-commerce initiatives. The online postal store, for example, is an extension of over-the-counter stamp sales, and online change-of-address services are an electronic version of the traditional postcard change of address forms, according to USPS.

Not all electronic services at the Postal Service are performing badly. Delivery Confirmation, which lets mailers check via the Internet when the mail they sent has been delivered, generated revenue of $278 million with expenses of $35 million during the first three quarters of fiscal 2001.

As for the others, the GAO cited "fragmented" and "inconsistent" management as "a major factor" in the Postal Service's lack of e-commerce success. For example, GAO auditors discovered that no revenue from the online postal store was reported as e-commerce revenue, but all costs for the store were reported as e-commerce costs.

On the other hand, revenue from online mailing was reported as e-commerce revenue, but costs were not reported as e-commerce costs, GAO auditors said. E-commerce business plans were not updated regularly to keep up with changing market conditions, they said.

The Postal Service said reorganization, increased management oversight and greater program discipline are being imposed to solve some of the problems.

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