The Dilemma Facing the USPS

The recession and migration to the Web is forcing the USPS to shrink

By George Linkletter

1. A small-town weekly newspaper, with a circulation of 1,000, fails. It is brought down by escalating costs, shrinking ad revenue and declining readership.

Although not as immediately visible, the USPS loses as well.

The revenue from delivering 52,000 copies of the newspaper over the next year evaporates. So does the revenue from delivering a range of routine business activities: monthly billing notices and subscriber payments, invoices and payments for advertising, and press releases, announcements, letters and promotional flyers.

2. After a lengthy struggle to maintain profitability, a trade magazine, with a bi-monthly circulation of 20,000, abandons the world of print/mail for electronic distribution. The USPS instantly loses revenue for delivering 120,000 copies of the magazine over the next year.

3. A consumer, weary of constantly increasing postage costs, switches to electronic bill payment for three bills that recur each month.

Over the next year, the USPS loses revenue from 36 monthly check payments that are no longer mailed. There is the possible additional loss of 36 outgoing bills or statements if the consumer opts to receive those documents electronically. Plus, there is very likely a loss from direct mail solicitations and offers, which may now be delivered more quickly and at far less cost via e-mail.

That single decision, by a single consumer, results in the likely loss of 100 or more mail pieces per year for a household. And that loss is forever.

Cumulative Impact

Now, multiple those three actions by the dozens of similar ones that are occurring every day across the country and you get some idea of how the recession and the continued migration of correspondence to the Web is impacting the USPS.

The USPS has precious few options.

Attempting to increase revenue via higher postage costs --- to compensate for the decline in volume and revenue --- will exacerbate what some observers grimly call an inevitable death spiral for the USPS.

Actions to lower operating costs are just as difficult.

Shutting underutilized post offices is anathema to local residents and politicians.  They want to maintain the status quo despite the onerous cost to the USPS. Here in Connecticut, the USPS has identified 150 out of about 400 postal facilities for possible closing. U.S Senator Chris Dodd (D-CT) immediately alerted the USPS that he is concerned about the impact of the closings on jobs in the nutmeg state. There are about 10,000 USPS employees in Connecticut.

Reducing delivery by one day a week may yield a modest savings, but it also paves the way to future reductions in service. Can every-other-day delivery be that far off?

Terminating large numbers of employees --- let’s call it what it is, not a euphemism like reducing headcount --- is strongly opposed by organized labor. Salary freezes or temporary furloughs are hardly more palatable --- and are unlikely to yield sufficient savings.

To remain viable in a world with less mail volume, and few prospects for higher volume in the future, the USPS must quickly and dramatically reduce costs and improve efficiency.

There is no silver bullet, no miracle mailing application that magically appears and somehow restores billions in lost mail volume and revenue.

The USPS must shrink. How quickly it does so will determine whether it regains financial viability or continues to struggle with ongoing losses.

Questions? Comments? Contact George Linkletter at georgelinkletter@charter.net.

He’s especially interested in hearing about firms that are increasing their mailing volume. Let him know so he can share your success with others, or e-mail the OutputLinks editorial team at press@OutputLinks.com.