Does The Post Office Have A Future?
The Postal Service announced another round of service cutbacks today that are likely to just make the rapidity of its decline increase
Thanks to unprecedented losses and a cost structure that seems unsustainable in the modern world, the Post Office announced today that it will no longer be able to guarantee next-day delivery of First Class Mail:
Unprecedented cuts by the cash-strapped U.S. Postal Service will slow first-class delivery next spring and, for the first time in 40 years, eliminate the chance for stamped letters to arrive the next day.
On Monday, the Postal Service said it wants to move quickly to close 252 mail processing centers and slow first-class delivery next spring, citing steadily declining mail volume. Postal vice president David Williams said the agency wants to virtually eliminate the chance for stamped letters to arrive the next day to help avert possible bankruptcy next year.
Williams said the postal service is not “writing off first class mail,” but it must respond to new market realities in which people are turning more to the Internet for email communications and bill payment.
After reaching a peak in 2006, first-class mail volume is now at 78 million. It is projected to drop by roughly half by 2020.
The announced changes are part of a wide-ranging effort by the Postal Service to quickly trim costs and avert bankruptcy. They could slow everything from check payments to Netflix’s DVDs-by-mail, add costs to mail-order prescription drugs, and threaten the existence of newspapers and time-sensitive magazines delivered by postal carrier to far-flung suburban and rural communities.
That birthday card mailed first-class to Mom also could arrive a day or two late, if people don’t plan ahead.
“It’s a potentially major change, but I don’t think consumers are focused on it and it won’t register until the service goes away,” said Jim Corridore, analyst with S&P Capital IQ, who tracks the shipping industry. “Over time, to the extent the customer service experience gets worse, it will only increase the shift away from mail to alternatives. There’s almost nothing you can’t do online that you can do by mail.”
That’s precisely the dilemma that Postal Service finds itself in. It’s been dealing with the better part of a decade now with the rise of the Internet, electronic payments, and alternative delivery methods, all of which have cut severely into a revenue stream that is already strained by large pension liabilities imposed by the Federal Government, and an inability to quickly react to changing business conditions due to the fact that it must receive Congressional permission to do things like open or close post offices or change delivery schedules. In the private business world, a company that sees a revenue cut coming has the option of reacting quickly to it, the USPS can’t do that, and the interjection of Federal and local politics into what ought to be a simple business decision makes the USPS’s dilemma all the more difficult.
The result of today’s decision by the Postal Service is pretty easy to forecast. Once people realize that “First Class” mail isn’t going to be so first class anymore, they’ll start switching to alternatives. Instead of mailing checks, more people will start switching to electronic payment methods. Even greeting cards are likely to take a hit from this decline in service. The most interesting impact, though, will be in business use of the First Class Mail. In many businesses, including the legal profession, relying on the fact that putting something in First Class mail means that it will arrive within a day if being sent within a defined geographic area is ingrained a matter of habit. Once that goes away, some businesses may well react by turning to alternative methods of communication — FedEx/UPS, courier services, electronic delivery, etc — and there goes yet another large revenue stream for the postal service. Give it another five years or so, and a decision like this is only going to make the situation at USPS worse, unless other changes are made.
Coincidentally, yesterday’s New York Times included an analysis piece by Elizabeth Rosenthal about the future of the USPS which increasingly seems to be primarily as a way for direct marketers to send junk mail to mostly unwilling recipients:
The founding fathers regarded the postal service as an essential instrument of nation building in a vast new country, serving to “bind the nation together,” according to the law that created it. After radio and telegraph communications rendered that role obsolete in the early 20th century, the post office instead took on an important commercial function, with bills and payments sent by mail allowing for the growth of regional and national companies. But faxes, then direct deposit, and now online billing and payments have provided alternative delivery systems for what was yesterday’s mail — from paychecks to birth announcements, said Ian Lee, a historian of both the United States and Canadian postal services.
“The post office is in the final stage of decaying into total irrelevance,” said Mr. Lee, a professor of strategic management at the Sprott School of Business at Carleton University in Ottawa.
The fact is that the primary beneficiary of the United States Postal Service today is arguably the advertisers whose leaflets and catalogs flood our mailboxes. First-class mail — items like bills and letters that require a 44-cent stamp — fell 6.6 percent in 2010 alone, continuing a five-year-long plunge. Last year was the first time that fewer than 50 percent of bills in the United States were paid by mail. There were 9.3 billion pounds of “standard mail” — the low-cost postage category available to mass advertisers — but only 3.7 billion of first-class mail.
In fact, to compensate for projected declines in “real” mail, the Postal Service has been aggressively promoting the use of new services for advertisers like Every Door Direct, which allows local retailers to place unaddressed promotional material in every mailbox in an area for pennies a piece, with a few clicks of a mouse.
“One could argue that the real customer of the Postal Service is now the direct mailer; it is a channel for advertising,” said Chuck Teller, founder of Catalog Choice, an online service in Berkeley, Calif., that helps people get their names off catalog mailing lists; this requires submitting the customer numbers on unwanted catalogs that arrive in the mailbox, one by one. And the problem is not just annoyance. Direct-mail advertising generates an estimated 10 billion pounds of waste each year, costing cities an estimated $1 billion to dispose of it, according to Catalog Choice.
Since it seems inevitable that this direct mail solicitation will become an even larger part of the Postal Service’s business — although judging by the contents of my mail lately, I don’t know how it could possibly get any larger — one has to wonder, as the article does, why does the government still own it? It’s a valid question. Why can’t the Pottery Barn catalogs be delivered by the same companies that deliver newspapers or telephone books (speaking of another relic that needs to die already)? All that would be required would be a change in the law that prohibits private entities from putting anything in a residential mailbox (a silly law to begin with, by the way). More importantly, why shouldn’t be able to easily opt-out of all the direct-mail nonsense that shows up in our mail boxes to begin with? Speaking personally, I just throw the crap away.
It’s been clear for some time that the nature of the relationship with the Postal Service is changing rapidly. Letter writing is so uncommon as to be non-existent, and if it weren’t for the commercials from Hallmark one wonders if people would waste the money on greeting cards. One example of how it’s changing can be found in Canada, which experienced a month-long Postal strike this summer, that most Canadians didn’t seem to notice, and many outright welcomed:
A mail strike of more than a few days will be painful in the short term. But in the long term it could lead to a much healthier state of affairs.
A strike will spur customers of snail mail to finally make the leap into a new technology — a leap they might not have made on their own without the inconvenience of a strike.
Once they’ve switched to an iPad, do you think they’ll ever go back to the dead-tree version of a magazine?
Millions of Canadians already pay their bills online — this will hasten that trend. Already, mail-order catalogues have given way to online shopping.
So a strike would be a momentary nuisance — until people realized they really didn’t need the post office anyway.
(…)
If it goes on long enough, a strike could be the spark to reform the post office — even to end its government monopoly over letter mail.
In a country as vast as Canada, it might be in the public interest to subsidize mail to the far north and distant rural regions. But why should the other 30 million Canadians be forced to put up with a slow, costly and now striking mail service?
As the Times piece goes on to note, Canada is already far ahead of the United States in postal reform. They eliminated Saturday delivery long ago, and mail delivery in many new communities in made to boxes in a centralized location rather than to individual houses. Across the Atlantic, postal reforms have been even more radical, with many European countries completely privatizing their mail delivery and opening the business up to competition. By all accounts, the new systems are working just fine. Hopefully, the USPS’s decision to effectively end First Class Mail will have the same impact that the Toronto Sun writer was hoping the Canadian strike would by causing more people to realize that, in a modern world, they can live without the Postal Service, thus finally providing the impetus to reform a system that operates as if the world of Andy Griffith and Beaver Cleaver still existed.
I still mail checks to pay for bills. I know, I know, join the 21st century, Rob!
Even if it takes a little longer (by which I mean +1 day or so) I probably won’t change my habits. I always mail bills in with time to spare.
But I do lots of other things online. Ultimately, I’m sure I will finally cave in and pay bills online too.
Though I have to say in at least one intance (my mortgage company), it’s their fault, not mine. They charge a $5 “processing fee” for online payments. Hah. But then I’m refinancing so that will probably change anyway.
The Sun chain are Fox wannabees. Worse than fish wrap.
The Sun wasn’t the only paper in Canada to note the general “yawn” that came from the postal strike this summer.
@Doug Mataconis:
Tell that to the seniors that still rely on it.
You cannot make policy for a nation of 300+ million people based on one small segment of it
*YaWn*
The USPS employees over 500,000 Americans and is only losing around $5 billion a year, about what it costs to run the Republicans’ failed wars in Iraq and Afghanistan for a week or so.
The Colourfield,
Also, how do you think those elderly people are going to feel when the entire mess collapses?
Ponce,
And at least 85% of what I get in my mailbox ends up in the trash on a weekly basis, probably more at this time of year.
I write one check a year to the IRS. Maybe I have another one for an off-chance bill of some sort. Otherwise, It’s electronic payments all the way. I use maybe three stamps a year, too. Electronic communications is satisfactory for nearly every transaction I perform.
Increasingly, banks are taking deposits, governments taking document submission via e-mailed scans. Passport renewal is one exception that comes to mind.
I still receive a few bills via USPS, but easily 90% of what’s in my mailbox goes into the trashcan right next to it. I don’t even bother bringing it into the house.
I see no mention here of the Poison Pill the USPS was fed by GWB and the Republican congress in 2006.
This was an attempt by Republicans to kill the post office. It can’t be privatized without a constitutional amendment so they just tried to suffocate it.
Let’s see. Demand for my product is down by a third. I haven’t adjusted my cost structure in decades because – Hey!! I’m a government entity!! and waste and featherbedding is my name!!
Who’s with me here? Subsidy for horse saddles!! Subsidy for buggy whips!! Subsidy for typists and typewriter manufacturers!! Anybody up for a tax increase for TV antennae manufacturers!? Let’s go. Let’s bring back the chimneysweeps!!!!! Horseshit street shovelers? Apply with Ponce. How about a government grant for an ice manufacturer who will deliver ice to keep your goods fresh in the ice box as we outlaw refrigerators………global warming you know. And all you other kids with your pumped up kicks, better run to your daddies, who run the newspaper presses……
@Ron Beasley:
Of course that bill passed with overwhelming bipartisan support and was co-sponsored by Henry Waxman, who happens to be a Democrat. In fact, there was not a single dissenting vote by any Democrat, or anyone else for that matter, in either the House or the Senate.
If you want to know where the pension guarantee provision came from, I would suggest starting with the lobbyists employed by the American Postal Workers Union.
No one has mentioned a key reason that slowing first-class mail is a poor idea: first-class mail pays for standard mail, not the other way around. At least at the margins increasing the delivery time will reduce the volume of first-class mail. A more effective move would be to reduce the volume of standard mail. Better yet, get rid of it altogether.
I had no idea there was a next-day guarantee for 1st class. Is that for reals? I don’t see time of delivery on the USPS “first class” page.
Not only that, they’ve got two “faster” grades above “first,” with “priority” and “express.”
Something smells on this report.
(Yes, the USPS should be changed to reduce costs, but yes we need universal delivery as a component of national infrastructure. Sure, the government could put universal delivery of tax forms out to bid every year, but government procurement auctions are not exactly models of economic efficiency. F-22 anyone?)
The prices the Post Office charges are limited by law to the CPI. This literally prevents it from charging sufficiently to cover the costs of its operations, and that is the poison pill which is slowly killing it
It’s supposed to be next-day within a defined geographic area, yes.
@Doug Mataconis:
If that’s true, they need to work on their marketing. Look at this classes of mail page.
Speed is answered “Yes” or “No.”
What a bunch of goof-balls.
I do think you are right that we had a vague idea that local mail did get there overnight, because that’s how the flow worked. But that is quite different from a marketing claim, and a marketing claim is what should have been really made, if there is to be an argument that it is now rolled back.
Doug,
Not everything is just about you.
The other people you see walking around on the planet are real human beings, not part of some hallucination you are having.
@john personna:
Last few times I went to the post office and asked for overnight shipping, they stated “We do not have overnight, we have priority and first class.”
I’m guessing its overnight for a defined area, like Doug said, but not overnight nationwide.
There’s a lot of stuff that we actually will still need the U.S. Postal Service for–at least until we change a lot of regulations.
Sending legal documents. Sending an application to the Patent Office. Did you know that if you send an application by Express Mail the date of filing is the date it gets deposited at the Post Office, not the date it arrives at the USPTO. Sometimes you NEED those extra days….not everyone has internet/fax/electronic scanners, y’know.
@Neil Hudelson:
I think “defined area” is wrong. They are selling an implication of speed. lol.
@Doug Mataconis: “You cannot make policy for a nation of 300+ million people based on one small segment of it”
Are you being ironic or optimistic?
The Post Office does a good job — it drives me crazy when libertarian cranks say we should privatize it to introduce free-market efficiency.
Is there anyone who really thinks that private companies are going to compete for the privilege of sending a uniformed representative to your home to pick up your letter and deliver it anywhere, any address, in the United States for 44 cents?
FedEx and UPS offer similar services, faster but with service restrictions, for 30 and 40 times more, and the USPS is inefficient for doing it for 44 cents? And I don’t know about everyone else’s experiences, but I get a heck of a lot of packages from UPS and FedEx that look they drove the truck over it. I haven’t had that experience with USPS.
The 45-cent First Class stamp is one of the biggest bargains going. The USPS should be allowed to raise its rates accordingly, including to the private companies (UPS, FedEx, etc.) whom it backstops by carrying the mail they can’t deliver at a profit. And they should be allowed to bring their pension obligations into a more realistic fit with their likely size going forward.
They provide a service a lot of us still need, depending on age, geography, life situation, etc. and do it pretty cheaply.
What’s more important – jobs or killing brown people?
@Doug Mataconis:
In fact we don’t know that since votes were not recorded.
Look at the FedEx terms and conditions and tell me whether FedEx guarantees next day delivery:
I don’t have time to plow through the over-one-hundred page Service Guide, but I think its debatable whether FedEx actually guarantees next day delivery.
Imagine if Obama said, “I have a foolproof way to employ 500,000+ Americans at a median annual salary of $50,000 a year who will provide every single American citizen and business with a needed service…and it will only cost the taxpayers $5 billion”
@anjin-san: Eureka — the 101st Postal Division! That’ll kill those two birds.
“Across the Atlantic, postal reforms have been even more radical”
At least you’re willing to admit that the kind of postal reform you favor would be “radical.” Also, about the reforms “across the Atlantic,” how’s that working out for them?
Herb,
Radical is not necessarily a bad thing. Sometimes, it’s worth trying.
And from all the studies I’ve read postal reform in Germany, The Netherlands, and Denmark, along with other nations, has worked out pretty well
@grumpy realist:” Did you know that if you send an application by Express Mail the date of filing is the date it gets deposited at the Post Office, not the date it arrives at the USPTO”
Yep. In my state the courts have approved the distinction (which largely originates in statute)for the reason that the express mail business is not regulated. Its one thing to say that FedEx and UPS have good track records, but you can’t distinguish them from discount providers like Billy Bob’s Firework and Postal Shack who may not have that good of a track record.
The funny thing is that I don’t think I’ve sent something with a stamp on it in years. But I still use USPS weekly. USPS Priority Mail beats UPS and Fedex in both speed and price by a LARGE margin for any package weighing under 75 pounds. So while I don’t really care about them scaling back first-class-mail, if USPS goes away altogether (or hikes the prices on their more premium services), I’ll quite the sad boy.
@Doug Mataconis: “Radical is not necessarily a bad thing.”
A radical solution is appropriate for a radical problem. The USPS’s problems can be tweaked on the margins, so a radical solution isn’t necessary.
Also, I’m sure the various European countries efforts at postal reform have been great for them. But we should remember that Germany, for example, has a much smaller population (82 million) in a much smaller geographic area (smaller than the state of North Carolina). I don’t think those reforms will be very useful for the US, with 3 times the population and a vastly larger geographical area.
What none of the libertarian types want to admit is if we get rid of the US Postal Service, there isn’t going to be any way to deliver cheap mail out to rural locations. You think Fed Ex and UPS are going to bother to set up the infrastructure? Hell, they’re already using a lot of the US Postal service to cover “the last mile” problem (and not paying enough for it IMHO.)
And until you libertarian geniuses find a way of *delivering* physical material over the internet, I’m afraid all that “oh, we don’t need any physical stores or the Postal service, we’ll just do everything electronically!” ain’t gonna fly.
I think we need a mail service, just in this day and age, it only needs to be 2-3 days a week. Just killing Saturdays won’t be enough.
Another quarter million people rendered unemployed by technology. We are going to need a Reconstruction & Reclamation Corps before long.
“You cannot make policy for a nation of 300+ million people based on one small segment of it”
It happens to be the segment that actually votes. We have the same problem with Medicare.
Steve
@PD Shaw:
Under Virginia’s rules, date of service is the same whether it’s sent via mail or commercial delivery service.
Interestingly, under those same rules, when a deadline for a certain action is set by the date of service an extra 3 days are added if it is sent via USPS. If it is sent by courier or by an overnight commercial delivery service, only one day is added to the standard 21 day deadline.
And that’s a rule that’s been in effect for the 20-odd years I’ve been practicing law here.
@grumpy realist:
Did I use the words “get rid of” in that post? No, I did not.
It is, however, clear that the current system is not sustainable and that, eventually, the idea of daily mail delivery will become as much of an anachronism as the Milkman.
@Doug Mataconis:
As broadband becomes increasingly expensive and real income for the 99% continues to decrease I really question if that’s true. Of course we could consider that connection to the internet is part of the commons and socialize it but that would drive you insane. I for one believe that monopolies should be public or heavily regulated.
Why is it “unsustainable?”
America can easily afford $5 billion a year for such a useful service.
You want to talk unsustainable, try the “defense” department and its $1 trillion a year budget.
@Doug Mataconis: You may not have stated that you wish to get rid of the US Postal Service, but I’ve run enough self-proclaimed libertarians who think it would be a peachy good idea….
Seriously, what is this bee-in-the-bonnett that libertarians have about public services vs. private services? The only reason that many private services end up cheaper than public services is because they don’t have to Serve Everyone At Cheap Prices–including all the economically inefficient localities/people.
I could run the US Postal Service damn cheaply if it didn’t have to deliver to every 12-hamlet village out in the middle of nowhere. Or if I could actually charge full cost of what it took to get the stuff there. Yeah, it means that someone will have have to pay $40 to get a legal notice out to a farmer out in Podunk, Kansas and he’ll have to pay $40 to dump something back in the mail, but hey, if he had wanted cheaper mail he should have lived closer to town, right? Isn’t that the standard Free market argument?
While it’s true that the USPS delivers to every location, no matter how remote, UPS and FedEx go just about everywhere too.
@Peter:
Yeah, but they don’t have to.
@Ron Beasley:
It would have only required the objection by a single Democratic Senator to unanimous consent to require a floor vote. In the House, a small group of Democrats could have similarly asked for a recorded vote.
They didn’t because they wanted to see it pass, obviously.
I’m waiting patiently for libertarians to put their money where their mouth is and exclusively use FedEx and UPS and cancel all incoming mail from that vile institution, the USPS.
Of course they won’t because they’re the biggest hypocrites on the planet, complaining about government services they directly benefit from.
@sam:
Read awhile back the Postal Service suffers from not being allowed to compete with UPS and Fed Ex by some sort of regulation. Already having personnel going everywhere anyway would have made it impossible for them to compete. This leaves the USPS with a business model that isn’t working.
The need for daily service from them has ended. They could cut their operation costs deeply by going to every-other day, half the drivers, half the vehicles, and who would notice the difference?
Split each zip code area into two equal parts. Add a letter suffix A or B, to each. The A’s get their mail on Monday, Wednesday and Friday’s, the B’s get theirs on the other days, with delivery on Saturdays.
@Lit3Bolt:
I have done everything I can to cut my need to send mail in my personal and business correspondence, actually. It’s easier, faster, more convenient, and it doesn’t fill my garbage can up with useless pieces of paper.
Everyone fails to realize that the government wants to keep a closer eye on everyones business. How much you make, how much you spend, what you spend it on, etc. Sooner than later they will control email and the companies will begin charging fees for paying your bills online, if they havent already ($3 processing fee, $5 transaction fee). So when the .44 cent Postal Service is absolete, you wont have a choice 🙂
So, in the face of rising competition and new technology, the USPS decides to do the one thing they do at a SLOWER pace?
@Ron Beasley: A fact that should be pointed out more often! In fact, if not for this bill, which also restricts their ability to raise rates, the post office would have made a million dollar profit last year!
@Rob in CT:
Those online payments fees for your mortgage company are referring to using their system to pay not a online checking by banks. Banks send paper copies of checks to your mortgage company unless they have financial ties with them. I have always wondered why anyone would pay fees to pay their bills. The most obvious reason could be that they are using a credit card to pay with.
The Postal Service will survive in one form or another since its a vital service to the country. The government needs to let the organization manage its own affairs. Right now USPS has to get govt permission to close offices and raise rates etc. They should be able to do that on their own based on what they think works not what some congressman thinks. If a location is unprofitable then close it period.