As anyone who keeps up with current events is aware, the United States Postal Service is in a very bad way.
The price of a first class stamp has just gone up again to 46 cents. If only that solved the problem, then we’d just accept it and move on. However, the Post Office posted a $15.9 billion dollar loss for the fiscal year that just ended in September 30th of 2012. And if that’s not enough bad news for you, they are declaring that they will be out of cash sometime around October of 2013 unless something is done.
As the chart below demonstrates, (courtesy of the Wall Street Journal) the volume of first class mail has seen a precipitous decline in the past ten years. The number of pieces mailed is now about half of what it was in 2002.
Now obviously the digital world has made a serious dent in the number of pieces mailed. Companies are saving money by pushing their customers to pay their bills and receive statements on-line. Financial service companies which used to mail huge numbers of proxy statements and prospectuses are now going digital. Back in the 1980's, I was a bank purchasing officer and we bought huge amounts of paper and printing much of which is no longer necessary because of the personal computing revolution. You can’t stop companies from reducing their costs through greater efficiency; especially when it’s what most of their customers find more convenient.
Another significant factor in the decrease in mail is the lousy economy of the past four years. The so-called recovery we have been experiencing is tepid at best with growth that doesn’t even keep up with the increase in new people entering the job market. While the movement away from certain kinds of mail would have happened regardless, robust economic growth would mitigate some of the pain for envelope and printing companies.
In its attempt to cut costs, the Post Office has slowed down first class mail delivery and is considering cutting Saturday delivery service. This is probably the worst possible way to deal with the problem. We are in the age of instant gratification courtesy of those same computers that are driving down the mail business. A recent article in the Boston Globe references a study by the Pew Research Center’s Internet & American Life Project concerning people under the age of 35 and the dangers of their hyper connected lives with this warning: “Negative effects include a need for instant gratification and loss of patience”. So at the same time that Gen X and Gen Y are moving away from mail partly due to the time involved, the Post Office decides to make us wait longer. Great.
As I’ve suggested in previous posts, the politics surrounding Post Office reform will make it virtually impossible to fix. Yet, the best solution for direct mailers and the many small businesses that serve them would be to abolish the government monopoly on first class mail service and allow private companies to compete for that service in the same way that FedEx and UPS have done for parcel delivery. That would allow direct mailers who provide the biggest chunk of concentrated business for the post office to receive preferred rates which would drive down the cost of direct mail and keep it strong along with the printers and envelope companies who provide the components.
In my next post, I’ll delve into the politics in a bit more detail and also flesh out a simple proposal for reform. As always, your comments are most appreciated.