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USPS tries same-day delivery for holidays

WASHINGTON - Emboldened by rapid growth in e-commerce shipping, the cash-strapped Postal Service is moving aggressively this holiday season to start a premium service for the Internet shopper seeking the instant gratification of a store purchase: same-day package delivery.

U.S. Postal Service
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WASHINGTON - Emboldened by rapid growth in e-commerce shipping, the cash-strapped Postal Service is moving aggressively this holiday season to start a premium service for the Internet shopper seeking the instant gratification of a store purchase: same-day package delivery.

Teaming up with major retailers, the post office will begin the expedited service in San Francisco on Dec. 12 at a price similar to its competitors'. If things run smoothly, the program will quickly expand next year to other big cities such as Boston, Chicago and New York. It follows similar efforts by eBay, Amazon.com and, most recently, Wal-Mart Stores Inc., which charges a $10 flat rate for same-day delivery.

The delivery program, called Metro Post, seeks to build on the Postal Service's double-digit growth in package volume to help offset steady declines in first-class and standard mail. Operating as a limited experiment for the next year, it is projected to generate between $10 million and $50 million in new revenue from deliveries in San Francisco alone, according to postal regulatory filings, or up to $500 million, if expanded to 10 cities.

The filings do not reveal the mail agency's anticipated expenses to implement same-day service, which can work profitably only if retailers have enough merchandise in stores and warehouses to be quickly delivered to nearby residences in a dense urban area. The projected $500 million in potential revenue, even if fully realized, would represent just a fraction of the record $15.9 billion annual loss that the Postal Service reported last week.

But while start-ups in the late 1990s, such as Kozmo.com, notably failed after promising instant delivery, the Postal Service's vast network serving every U.S. home could put it in a good position to be viable over the long term. The retail market has been rapidly shifting to Internet shopping, especially among younger adults, and more people are moving from suburb to city, where driving to a store can be less convenient.

Postal officials cast the new offering as "exciting" and potentially "revolutionary." Analysts are apt to agree at least in part, if kinks can be worked out.

"There is definitely consumer demand for same-day delivery, at the right price," said Matt Nemer, a senior analyst at Wells Fargo Securities, in San Francisco. "The culture in retail traditionally has been to get a customer into the store, with the immediacy of enjoying a purchase being the main draw. So, same-day delivery could be huge for online retailers. The question is whether the economics can work."

He and others said that consumers are a fickle lot when it comes to shipping, seeking fast delivery but also being sensitive to its pricing. Many will order online and pick up merchandise at a store if it avoids shipping charges, or will agree to pay a yearly fee of $79 for a service such as Amazon Prime to get free and unlimited two-day delivery. Others even purchase a higher-priced item if it comes with free shipping.

Under the plan, the Postal Service is working out agreements with as many as 10 national retail chains for same-day delivery. The mail agency says that nondisclosure agreements don't allow it to reveal the companies. But given the somewhat limited pool of large-scale retailers - they must have a physical presence in 10 or more big U.S. cities to be a postal partner - the list is expected to include department stores, sellers of general merchandise, clothiers, even perhaps a major e-commerce company or two.

Consumers will have until 2 or 3 p.m. to place an online order with a participating retailer, clicking the box that says "same-day delivery" and making the payment. Postal workers then pick up the merchandise from nearby retail stores or warehouses for delivery to homes between 4 and 8 p.m. that day.

This holiday season, the Postal Service expects a 20 percent jump in its package volume, higher than its shipping rivals.