The Gift of ... Snail Mail?

The U.S. Post Office is testing out gift cards in an effort to make snail mail a little more appealing, but is the seemingly simple move toward modernization enough to bring the nation’s oldest messenger up to speed?

The troubled government agency has been trimming costs and attempting to spark interest in its ancient service for months -- it has even sought help from Congress -- but its fruitless efforts have done little to reverse the red ink. The post office reported a $329 million quarterly loss in February.

The situation seems to be worsening for the post office, which admitted it would likely have a cash shortfall and hit a debt borrowing limit this fiscal year, as consumers turn toward more consumer-friendly methods of communication, from fast shipping services offered by companies such as UPS (NYSE:UPS) to social media and email.

“People keep turning to the Internet. Services are changing,” consumer savings expert Andrea Woroch said. “The post office is definitely going to have to update something down the road to keep it going.”

The agency’s latest attempt to boost popularity comes in the form of little plastic cards. Starting in June, the cash-strapped agency will offer cards issued by American Express (NYSE:AXP), Discover (NYSE:DFS), MasterCard (NYSE:MA) and Visa (NYSE:V) on a two-year trial basis at 2,000 post offices.

The agency is attempting to grab a piece of the popular gift card market. The National Retail Federation said gift cards were purchased last holiday season by more than 75% of consumers.

The catch: they will only be sold at Postal Service retail windows and will cost an additional fee of $4.95 each.

Woroch questions whether the cards will draw the type of attention and sales the post office so longingly craves.

“It sounds like the sales plan has its good points and bad points for consumers,” she said. “This is really to get people thinking about snail mail again; attracting customers, winning back those who have turned to UPS, trying to revitalize their consumer base and get with the times.”

An inherent misstep by the post office, though, is the unavailability of the gift cards over the web, and unfortunately for the post office, consumers have clearly stated their preference for the Internet.

Digital analytics measurer comScore said in January that online retail sales hit an all-time record over the holidays, jumping 12% from the year-earlier period to $32.6 billion. Cyber Monday became the first online spending day on record to surpass the $1 billion threshold.

“Being able to email or print them at home, or send them directly to the person, would be a huge advantage for them,” Woroch said. “Can you imagine Macy's insisting customers visit one of their stores to buy a gift card? Such a business model just wouldn't work in today's plugged-in world.”

Long lines at post offices are often daunting, she said, and forcing customers to wait in them just to buy a gift card is far from enticing. While the service, which was approved by the Postal Regulatory Commission last week, may be a push by the agency to draw consumers into post offices, tech-dependent consumers will likely frown at the inconvenience.

Purchasing fees may also crimp card profits. In the retail spectrum, large companies like Macy’s (NYSE:M) often offer incentives for gift cards, and Woroch suggested perks rather than fees would help drive consumer interest.

It's not all bad, though. While gift cards for the post office may not be on the top of everyone’s shopping list, the cards may at least find some interest  in certain niche markets.

College students receiving packages from mom and dad and sending goods to and from school would likely welcome a free-shipping gift, as would consumers undergoing a move.