How to Save the US Postal Service

USPS Trucks lined up at sunset

The United States Postal Service is in trouble. At a critical point in its history, what will it do to stamp out its debt and continue to deliver mail? I have a few suggestions, but first let’s take a look at how the US Postal Service got to this point. 

With roots as far back as 1775, the USPS has seen the mail delivery system undergo radical transformation from the legendary Pony Express to mail trains to cars and planes. Originally a government entity, the US Postal Service became an independent agency of the US Government in 1971 and hasn’t directly received any taxpayer funds since the early ’80s (with a few minor exceptions). Since the early 2000s, revenue has been dropping sharply, prompting the USPS to increase postage rates while also looking for ways to decrease costs. The USPS posted a budget deficit of $8.5 billion in 2010. To fix this increasing shortfall, the USPS has proposed closing up to 3700 small post officesraising rates again, and only delivering mail five days instead of six.

Others, such as Sen. Claire McCaskill (D-MO) and Apple, have also proposed ideas to help save the Postal Service. Sen. McCaskill suggested in a Congressional hearing:

“I’m not sure that there has been a marketing campaign about the value of a written letter. … I really believe that if somebody began to market the value of sending a written letter to someone you love, you might be surprised on how you could stabilize some first-class mail.”

Apple’s new Cards app, announced as a part of its latest keynote event for the iPhone4S,  lets you “create and mail beautifully crafted cards personalized with your own text and photos — right from your iPhone or iPod touch” for only $2.99. Will these two things help save the USPS? I wouldn’t use the word ‘save,’  but they certainly won’t hurt.

The core problem facing the Postal Service is the way its business model is set up. Think about it: the Postal Service doesn’t charge people to have mail delivered but charges a person to have a PO Box at a Post Office, where the mail already goes before being delivered. To help you understand this a little better, it would be like Taco Bell including home delivery in its prices, but charging extra to go to the physical store to pick it up. Not a very smart business model is it?

So, how do we save the Post Office? Here’s my proposed idea. Feel free to critique it, add to it, and/or pass it along to elected officials.

  1. Stop charging for PO Boxes- With increasing mobility and concern over privacy/security, using PO Boxes as the primary “end point” of the mail system is much more viable than it was 20-30 years ago. With many households having multiple members getting out of the house at some point of the day to go to work, run errands, or transport kids around, it is only a minor inconvenience (if any at all) to make one more stop at the local Post Office to pick up the mail or drop off mail to be sent.  Additionally, a person wouldn’t have to worry about the security of their mail. By having it all sent to a PO Box, no one can drive by an unlocked mailbox (for most people), open it, and take out credit card statements, utilities bills, etc . Also, each time a person/family goes on vacation, they wouldn’t have to hassle with contacting the Post Office to hold their mail. PO Boxes are more secure and, since all mail already travels through a Post Office before it is delivered to a house, no additional costs would be incurred with this change.
    The USPS could still generate revenue from PO Boxes despite giving every household one for free. If an individual/household wanted more than one box, then a rental fee could be charged for that second box. Additionally, each Post Office could offer a service that alerts an individual when their is mail in his or her PO Box via text message, email, etc. so that they don’t have to go by the Post Office if there is no need to.
  2. Start charging for home delivery (w/ exceptions)– Where do you think a lot of the aforementioned budget shortfall comes from? I would imagine a lot of it has to do with fuel costs.  If you’ve ever seen a mail delivery vehicle, you can tell they aren’t the most fuel-efficient things ever created (the whole stop-at-every-mailbox thing doesn’t help MPGs either). By giving every household a PO Box free-of-charge, the need for delivery would be greatly reduced. To further reduce the cost of delivery, the USPS should start charging a fee to do so (just like any pizza company does). Depending on the frequency of delivery needed, the USPS could charge yearly, weekly, or daily delivery schedules in addition to charging one-time delivery fees on top of that (companies that share an office complex with one mail box would split the costs between them).
    Of course, exceptions to this delivery charge would be made for those that are home-bound or unable to make it to a Post Office for whatever reason. All they would need to do is to fill out an application indicating need and submit it to their local Post Office.
  3. Become more active in social media- Let’s face it, if you are a business that wants to connect with consumers, you need to be active in social media. Neither the USPS Facebook Page nor Twitter account has had active updating/posting. With a company like the Postal Service, it is important to be able to connect with customers and, like Sen. McCaskill was hinting at, develop the emotional attachment that some people have to sending snail mail. They could even create a Facebook or online tool that is similar to Apple’s Cards app that would allow people to send postcards, written letters from the internet. Meet the next generation of mail-senders where they are: online.

So there it is. One idea of how to help the United States Postal Service stamp out its debt and become a First Class service again. What do you think? Would it work if it could ever be implemented? Leave your thoughts in the Comments.

-Lawson
Learn It. Love It. Live It.

[image credit: Bitch Cakes on Flickr]

Advertisements

About Lawson Hembree
Lawson is an entrepreneur, ministry leader, and outdoors enthusiast who also enjoys blogging about business, ideas, and theology. Want to continue the discussion or write a guest post? Let's Connect!

9 Responses to How to Save the US Postal Service

  1. Wow, Lawson! I appreciate your thoughts on this. I knew the USPS was having financial trouble, but I had no idea it was that high. As for your ideas: If I have something really important coming in the mail, I have it sent to my work address so I know that once it gets here it is safe. Especially since there are times when I don’t get home late at night and I usually forget to check my mail. Granted, my mailbox is hooked to my house next to the front door, I still forget to check it.

    My opinion may be a little skewed toward the idea of a PO Box because I have been so used to going to my JBU PO Box for the past 4 years, but still: I like the idea of PO Boxes. I also like the idea of receiving a text when I get mail. I would totally go for PO Box over home delivery. When using my JBU “PO Box” I always felt like my mail was safe and if I forgot to pick it up for a few days it was okay.

    As for stamps: In high school I found my dad’s old stamp collection and found it super intriguing. We bought some updated pages and started collecting current stamps. It was a fun hobby for us, and it was neat to see all of the specialty stamps put out by the Post Office. What if they pushed stamps via social media? What if they pushed stamp collecting? (Kind of old school, but some people might enjoy it.) I like the idea of a campaign to send hand-written letters, and that could be promoted via social media. Instead of raising the price of stamps, they need to figure out how to sell more of them.

    • Ashleigh,

      Great point on the stamps! It would be an interesting idea to make stamp-collecting fun again.

      As far as social media goes, the USPS needs to view it as a tool rather than a threat (I don’t know if they view it as a threat now, but I could see how that would be a possibility). All of the social media sites offer huge opportunities for the USPS to connect with individuals to not only let people know what’s happening at the Postal Service but to communicate the value in written letters. A written letter has sentimental value for our generation, so take advantage of and encourage that.

  2. Great thoughts and a great article. A few thoughts:

    Will you start charging businesses to have mail delivered? My bigger question is how this impacts the common low wage earner. Seems that they may loose the ability to get mail, especially if they have no internet to do email, and dont have a vehicle to make it to the post office. Would you support subisides for the fees for certain income brackets? Also I am curious about PO boxes, and if they would have to invest massive capital in order to have enough. I am guessing that my local Post office has somewhere in the neighbor hood of several thousand PO boxes. If there are 10 post offices in Springdale (and lets be honest these are VERY conservative numbers) then if everyone in springdale tried to get a PO box because they didnt want the fee for mail delivery then there would only be 20-30k PO boxes (lets be honest there probably isn’t even 10k in Springdale) Where would the other 40K PO boxes come from. Sure some people would pay for delivery, but as a service that has been free for a hundred years, adoption towards paying would be VERY SLOW.

    My other concern is that we are not necessarily solving the problem. The demand for mail carrying is impacted by several factors, but price is certainly one of them. While the Demand for Mail delivery is less dependent on price. Some people may feel this is a great argument for your plan, but it breaks down at the National Scale. Here is an example.

    Lets say that 2 million letters are mailed at the market rate of $44cents. If that rate drops to $0 cents then the demand for mailing letters will raise significantly. Businesses will use more mailing advertising, since they can print for less than 2 cents a page and the envelope is less than 5 cents. individuals will mail more because there is less hassle from getting stamps and because it is as cheap as email. So Demand will increase exponentially. We have no way to predict exactly how much, but a safe estimate is that it will double due to business use alone. So in this hypothetical example we now have 4 million letters every day, to the same number of people. So in order to handle this increased volume it will require more capital investment, more people, and more money. So the question then becomes will they actually make enough money to handle the increase in demand.

    Lets look at the opposite side. So in our hypothetical example there are 2 million letters being delivered and for the sake of the example that those are delivered to 500K people or 4 letters per household. So since we can assume that the number of people receiving mail will have no significant change, we can calculate how much they would have to charge for mail delivery. 2 million letters at 44 cents each is $880,000 in Revenue per day. We divide this by 500k and we find that each person would have to $1.77 per day for mail delivery or $52.06 per month. Who is going to pay $50 per month for mail delivery. What is more likely to happen is that Half of the subscribers stop receiving mail immediately. Which means Revenue would either drop in half, or they would have to charge $100 per month for delivery. Now these are not real numbers as I fully recognize, but I receive a lot of mail, and if I have to catch the $.44 per current letter volume it would be a lot probably close to $30-$50 per month

    Your counter argument is obviously that the costs would decrease dramatically as well. However it is hard to imagine that they would be halved. And there would still be transport between towns, sorting, receiving the mail etc. But I can easily concede that it may reduce costs, at the expense of laying off thousands of postal workers. Also it may actually increase costs in some areas as a single truck may have to drive a long way to deliver the the few Rural houses that actually pay for the delivery. At the root of it, your idea has some real good merit to it, but the end result comes down to some political argument not a business one. Let us not forget that the reason the post office is in this mess is a combination of reduction in use, and a requirement by the government that they PrePay retirement costs for their employees (started in 2007) at nearly 5BILLION dollars a year. If you look at a graph of their revenue and costs it Spikes in 2007.

    So all of that just to mention that I like how you are thinking, its a cross subsidy either way. My gut reaction is that those mailing are more willing to pay than those receiving, but I could be wrong. However if it was a business it would certainly be innovating and redeveloping what it does. As a government entity it is stagnant and oppressed by political thought. I enjoy reading your blog!

    • Great points Andrew!

      I would’ve addressed some of the “cons” of the ideas in the original post, but then it would be so long that few people would read all the way through it. 🙂

      As you point out, the most obvious barrier to this idea (or my last post about the Integrated Colleges: http://tinyurl.com/IntegratedCollegesLH) is politics. I could say more about that, but I will refrain.

      To address some of your other points:
      — I doubt the volume of mail would change much since the shift isn’t necessarily in the cost of sending/receiving mail, but how the cost is paid for (many people will incur no additional cost at all since they will opt for the PO Box). The main thrust of this idea is reducing costs by reducing fuel/personnel costs, and covering the ones that remain with an additional fee (that isn’t really additional since many people are already paying for PO Boxes) rather than paying for a stationary PO Box that costs the USPS almost nothing to maintain while offering delivery “free” when it has significant costs attached to it (that’s point 1 & 2 of the original post). Point 3 of the original post focuses on stimulating demand again.
      — Yes, businesses would be charged to receive mail. This could be done two ways: 1) The fee is incorporated as a part of their yearly taxes that they pay (recommmended) or 2) They pay a yearly fee for delivery/PO Box just like everyone else (the problem with that: What if they don’t pay the fee; where would their mail go?) Of course, businesses could also opt in to using the free PO Boxes also if they chose (given certain criteria are met).
      — Low-income families would be eligible to receive free/subsidized mail delivery by using the form mentioned in the original post.
      — The PO Box space at Post Offices would mean some capital investment by the USPS, but I would guess not as much as we would think. With most cities/towns having lots of empty PO Boxes and multiple Post Offices, most areas would only need an addition to their additional space (though some new Post Offices would need to be built also). The short-term investment may be moderately high, but the long-term savings would make it feasible.
      — I think there would be considerable savings from switching from a free to paid delivery system. The costs for moving the letter from sender’s Post Office to recipient’s Post Office would be covered in the price of the stamp (if not providing a small amount of revenue), while any delivery costs (fuel, personnel, etc) required beyond that would be covered by the delivery fee. To use your example of the rural mail delivery, that cost to deliver already exists, but is covered only by the stamp (and maybe not even covered then). Should the system change, the same trip would still be taken, except it is covered by the delivery fee now and since the number of delivery stops would likely decrease, MPGs would go up and the Post Office could use smaller-capacity, more fuel-efficient vehicles than Jeeps and Tahoes that are common in rural areas now. The delivery fee in any area could be setup in one of two ways: 1) a tiered national delivery rate based on desired delivery frequency that everyone pays no matter their location or 2) a delivery rate set by each state/town/post office and approved by USPS that varies based on avg. distance traveled by the delivery person
      — Of course, this change also implies a loss of jobs, but probably not as many as you would think. Fewer delivery personnel would be needed, but more Post Office employees would be needed to handle customer service (reduce the ridiculousness of waiting in lines for 30ish minutes waiting on the one employee to help everyone). On the flipside, with technology continuing to advance, fewer sorters/handlers at each Post Office would be needed since that will be automated. So, yes, in the long run, fewer employees will be needed (where politics/unions will again interfere).

      Thanks for your thoughts Andrew!

      • I did read everything you wrote, but it wasn’t till I reread it that I found a few answers to questions I had asked.

        Dang politics at it again interrupting how everything works.

        However I would like to politely disagree with you on 1 final point: Volume

        I understand that the average user would not increase volume even if letter carrying was free to them. There is not an increase in incentive to send, and still the barriers to sending. However businesses would increase usage. Mailing advertising is still one of the most target able, and responsive forms of advertising. When I was in Cutco sales we spent 90% of our advertising budget on mailers, and that budget was anywhere from 10-30% of our revenue. Currently mailing the letter is 90% of the cost, if you eliminate that- or make it such that cost does not increase with volume. I would send 5 to 10 times the amount of advertisements. We are talking about a significant need for capital investment to start sorting 5 times as many letters.

        Anyway it seems actually backwards to me. Mail is actually incentivised to have the person with the most benefit paying for it. The person who sends the advertisment or the letter. Backwards incentivising may actually reduce profitability from the mere perspective that it is worth far less.

        No one can tell for sure what would happen. The good aspect and interesting one is that the post office needs to be its own entity to some extent, borrowing 15BILLION dollars is just a tax for it. We need less regulation in some industries (entrepreneurial ones) and more regulation in others (financial).

        Great Article!

  3. Zach Burks says:

    The postal service is worth saving.

  4. Zach Burks says:

    Oh wait… no it isn’t

  5. ck says:

    Let’s be realistic. Did we forget that the USPS is still a government entity? To institute these changes would take 25 years and who even knows if we will be using paper at that point. The solution is simple. Require all Federal Government offices to utilize the USPS for delivery of overnight documents and regular mail. Currently FedEx and UPS handles the bulk of the mailings, seems counterintuitive to me when you have an entity that is struggling to stay afloat and you are giving away the work. Fact is employees at government agencies are too lazy and complacent to get the mail to a mailbox and USPS does not really want the burden of all that volume.

    We also need to bring some professionalism back to the postal service. Require the workers to wear uniforms again and have some pride in the job they are performing. Postal workers around here look like prisoners from a work release program in grass stained sneakers, unshaven and wearing t-shirts. You are unsure if you should open your door when the postman rings.

  6. Pingback: Learn It. Love It. Live It. [Post #100] | Lawson Hembree's Blog

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: