The U.S. Postal Service today won approval to expand a test of delivery groceries to online shoppers.
The Postal Regulatory Commission gave the go-ahead for a test of up to two years in the San Francisco area. In its ruling, the commission said the USPS would have to file again if it wants to expand the test beyond San Francisco. USPS has indicated it may seek to expand the text to such cities as Phoenix, Las Vegas, and Portland, OR.
The Postal Service has been testing early-morning grocery deliveries in recent months with Amazon.com Inc., No. 1 in the 2014 Internet Retailer Top 500. Amazon has been delivering orders in branded totes, some of them containing freezer packs to keep perishables fresh, to postal facilities between 1:30 a.m. and 2:30 a.m. Postal carriers have been delivering the totes to customers’ doors between 3 a.m. and 7 a.m.
In requesting approval for a 2-year test of the grocery delivery concept, the USPS said it had been making the deliveries in 38 ZIP codes, delivering on average 160 totes per day in each ZIP code.
The commission ruling authorizes USPS to begin the 2-year test tomorrow. USPS did not immediately say when it expects to launch the expanded test or whether other retailers would be involved.
The commission turned down a request from USPS for an exemption from a rule that limits to $10 million a year the amount of revenue the Postal Service can derive from such tests. The regulators said it was too soon to say how much revenue the test would generate, and that USPS could reapply later if it finds it needs the exemption from the rule, which is designed to prevent the government-subsidized postal service from competing unfairly with private carriers.
The USPS did not say how much it would charge for the delivery service. But the commission said it found that average grocery delivery charges in the San Francisco area range from $3.99 to $15.99 and that “the prices offered by grocery delivery service providers operating in San Francisco are comparable to the price range the Postal Service intends to test.” The Postal Service filed its proposed pricing under seal, so that the prices are not publicly available at this time.
The commission’s decision was criticized by the Taxpayers Protection Alliance, a nonprofit group that generally favors reduced government spending and that opposed the Postal Service’s application to test the delivery service. “Efforts by the USPS to enter into a new, private market is simply another way for the agency to expand their reach without instituting real reform—including measures that would breathe life into its mandate of delivering the mail on time to its customers anywhere in the country,” the organization said in a statement. “A government agency should not be working to compete with American businesses.