The Postal Service is in big trouble. The quasi-governmental organization has lost money every year since 2005 and is on track to be $7 billion in the red this year. Healthcare and retirement costs are the main culprits, but the volume of mail is also plummeting. With more consumers using E-mail as their primary means of communication and paying bills electronically, the amount of mail crisscrossing the country isn't expected to return to past levels. Personal letters are now estimated to compose only 6 percent of snail mail traffic. Postmaster General John Potter recently talked with U.S. News about how the service is adapting to this new reality. Excerpts:
How is the Postal Service changing?
For years, we've been aggressively managing the changes in the Postal Service. In the last year, we've cut thousands of jobs and cut our use of overtime. About 110 million work-hours have been cut since last year. We've renegotiated contracts with suppliers and service providers and closed postal buildings. But service is at record levels now, as well as customer satisfaction. Are enough changes possible, given the legal requirement of universal service, benefit contributions, and rules on closing facilities?
Do I wish we had latitude beyond the current law? Yes. We are consolidating facilities, but the law prevents us from closing facilities for economic reasons. An organization like Starbucks closes 800 stores and is rewarded for their adaptation to the economy. If I suggest closing post offices, I'm vilified. Then again, we have a universal service requirement, too. So, there's a balance. Is universal service sustainable?
If you can only sell stamps at a post office and use of the mail is diminishing because of electronic diversion, it's a formula that doesn't have a successful ending. The change that we've been seeking is flexibility on closures of post offices, and we'd like the ability to sell other things besides postal products. We have a retail network of 37,000 stores, with 8 million people who walk through the door every day. Now, there's a different mind-set in the United States about government competing with the private sector, but there's also a strong demand for universal service, and we have to find a way to fund it. I'm reluctant to ask for government appropriation because our model has worked for many years. What do the retail options look like?
Around the world, other postal services generate income in other ways. In Australia, you can renew your driver's license. In Japan, you can buy insurance. In Italy, you can do banking. In France, you can buy cellphones. Does it make sense to continue six-day delivery?
I don't think it does. We should move towards five-day delivery because back in 2000 we were delivering 5.9 pieces of mail per stop per day. Since then, it's dropped to 4.4 pieces. The type of mail we're delivering has changed, too. There's more low-margin advertising today and less high-margin priority mail. Most Americans say they are willing to have five-day delivery if it means that postal rates will stay down. Let's talk about "low-margin advertising." How much junk mail do you get?
I get a lot of advertising mail at my house. But the advertising mail is what allows us to finance universal service. If you eliminated advertising mail, then stamp prices would be much, much higher because we do make a profit on that mail. There's a real lack of understanding of how much that advertising mail contributes to our economy. For every dollar you spend on mail advertising, you get a $12 return, on average. That's true for advertisers, but what about the cost to taxpayers from filling up landfills and carting away unwanted mail?
Someone could say the same for advertising in magazines. But people subscribe to magazines. They aren't normally dumped, unsolicited, on the front porch. The Environmental Protection Agency says 44 percent of all junk mail goes in the ground unopened.
All I can say is that people complain mighty loudly when they don't receive the same free coupons that their neighbor receives. I understand that there's a desire from consumers to control what's in their mailbox.