Cash-strapped USPS tests same-day delivery

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Emboldened by rapid growth in e-commerce shipping, the cash-strapped U.S. 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 post office'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 only work profitably 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 the Postal Service reported last week.

But while startups 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.

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 payment. Postal workers then pick up the merchandise from retail stores or warehouses for delivery to homes between 4 and 8 p.m. that day.

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