Monday, December 19, 2011

CPU: A Cash-Back Story

For those of you who have no clue what a CPU is, let me explain.  A CPU is an acronym for Central Processing Unit, which is a main component of computers.  But that is not what CPU means in this instance.  For all intents and purposes for this article, a CPU means Contract Postal Unit.

Really, it does.

That's what it's actually called.  Don't believe me?  Call USPS.  Their number is 1-800-ASK-USPS (you may need to ask around about it, because it's something only for existing businesses, but it is something they offer).  Don't worry.  I won't go anywhere while you call and check on this.  I'll just sit here, waiting patiently, while you show that you don't believe me.

Now that you have checked into it and fully believe me, we can discuss this concept more fully.

The entire premise of a CPU is to cut down on the USPS costs.  You see, it costs a lot to own and maintain those large postal offices, so they came up with a better solution, which happens to be even more convenient for us postal users.  CPUs are contract postal units which are full-fledged post offices (albeit on a smaller scale) found within businesses.  They may be found in grocery stores like Safeway, or Walmart, or other large non-grocery stores.

By doing this, the USPS is able to cut costs by closing unprofitable large post offices and letting go of many employees (cuts down on payroll, which is 80% of USPS costs).  The upside is that customers won't have to go to another location to ship packages, buy stamps, or do most of the things they currently do at the post office.  This is a win-win method for the USPS.

But, you may ask, wouldn't those CPUs charge more than what the post office charges?  No.  When you sign up to have a CPU, you agree that you will not charge any more than what the USPS charges for shipping, stamps, etc.  Same costs, more convenience for customers.

Well then, how do they make money?  Good question.  They make money based on the amount of revenue generated monthly.  It's an affiliate program (of sorts), where the CPU does business for a month, and after that month, an 8% commission is given to the company hosting the CPU.

For example, let's say that Walmart has a CPU found in one of its stores.  That CPU does $200,000 in sales for the first month (stamps, shipping, etc).  Walmart management rejoices.  After that first month finishes, USPS makes sure that the receipts are valid, and after finding them valid, they send a check to Walmart for $16,000.  Walmart made $16,000 for that month by only letting the USPS take up part of its space.

So, what my thoughts for this business was to have a mailbox store.  That would be the main focus.  Mailboxes.  You could add something auxiliary products, like boxes, tape, shipping stuff (but no shipping services), but because mailboxes are very simple and profitable (you only have to put mail in the boxes once a day, and that's it.  You can sit around the rest of the time), that's what the focus would be.

This business must be placed in a college town, because college kids would be more likely to use these services on a semester basis (the prices would be approximately $10 per semester for a small box, and since there would be a few thousand mailboxes in the store, that would be a lot you could do each semester).  After being in business for two years (that's the minimum amount of time before they will let you have a CPU just to make sure that the business is not failing - that'd be stupid to put one in when the business is failing), you apply to have a CPU.

One big thing to do when you start the business: you MUST offer cash-back to individuals and businesses if they open a debit account with the company (debit account is where they give you money to put into an account, and all purchases are credited from that account.  A credit account is where you loan them the money with the expectation that they will pay the account off).  That is imperative, because if you start that after getting a CPU, the USPS will consider that against the terms of the agreement, and they will not give you a commission (I specifically checked on that aspect, and they informed me that I could only offer cash-back if I did it before being accepted for a CPU).

Once you have been accepted to have a CPU, you will keep the cash-back program going, and you can add to the program the postal services--that includes stamps and shipping.

With that, you can speak with businesses and expand your business, and since stamps and shipping will be given at a discount, they will be more than likely to get all their postal services from your company.  The only caveat will be that you cannot focus on the discounted stamps and shipping they will receive.  You can mention it, but you cannot make that the main selling point.

So, that is the CPU business.  Take a good look at it and you will find that it's one of the more awesome ideas that I have.

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