GAO reports USPS e-commerce faltering

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

Instead of making money for the Postal Service, the e-commerce initiatives have required subsidies from other USPS operations, GAO said in a report to Sen. Thad Cochran (R-Miss.) released late last month.

Cochran and other members of Congress have questioned whether the Postal Service should even be involved in e-commerce. Initially, concern focused on whether USPS, which is a government agency, is inappropriately competing with private businesses involved in e-commerce. But increasingly, concern is that the Postal Service, which rang up a $1.7 billion operating loss last year and $5 billion in losses related to the Sept. 11 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-mail.

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

* Certified e-mail delivered in paper form.

* Electronic sales of greeting cards.

USPS also offers a number of other online services. USPS officials contend that they are not e-commerce initiatives, however, but extensions of traditional postal services.

The online postal store, for example, is considered 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.

Not all electronic services at USPS are performing poorly. Delivery Confirmation, which lets mailers know via the Internet when the mail they sent has been delivered, generated revenues of $278 million with expenses of just $35 million during the first three quarters of fiscal 2001.

As for the other services, 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 revenue from the online postal store was not 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.

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