The Last Gasp Of The USPS?
By Matt Pillar, editor in chief
The Internet isn't killing the USPS. The USPS is committing suicide. Its decision last week to cut $3 billion in costs by slowing down first class mail service, among other things, flies in the face of the world as we know it.
Granted, some big changes must be made if the Postal Service, which experienced a 25% decline in first class mail volume over the course of the past decade, is to survive. But slowing down service? Eliminating Saturday delivery? With these moves, watch it take a mere five years to double the decline the USPS experienced over the past ten.
Lots of folks are pointing the finger at the Internet, implicating e-mail and Facebook, where the cordial greetings and photos and invitations that were once sent mailbox-to-mailbox are now so often exchanged. Meanwhile, the USPS' two biggest competitors (UPS and FedEx) report strong revenue and earnings growth, quarter-after-quarter, year-after-year.
The Internet didn't kill the Post Office. The Internet feeds parcel package companies on rapidly-growing e-commerce sales and innovative consumer services. Were the Postal Service not so slow to modify its services to better appeal to new markets (i.e. e-commerce) to compete with UPS and FedEx, first-class mail wouldn't matter so much. Now, as consumers, merchants, UPS and FedEx are collectively leveraging the powers of technology and competition to achieve blazing-fast cross-channel merchandise fulfillment, the Postal Service is taking a disastrous step backward by slowing things down.
Even if it can gain ground on its competitors' e-commerce market share, can the USPS get out of its own way? It alleges to be making moves toward becoming more nimble — planning to shutter some 3,600 of its 32,000 locations and to let go 120,000 of its 560,000 employees by 2015 (this on the heels of 110,000 job cuts from 2007-2011). Given that 25,000 of the Postal Service's 32,000 Post Offices currently operate at a loss, shutting down a few thousand isn't likely to be effective. What if 78% of your stores were operating at a loss? Would you close only 11% of them?
As for the cost of labor, the Postal Service's spends 80% of its budget taking care of those 560,000 workers. By contrast, FedEx spends almost half that much on its workforce of about 300,000; UPS spends 63% of its budget on its 400,000 associates.
Of course, the USPS is the victim of an extreme and incompetent regulatory force: Congress. It's officially a "semi-independent federal agency, mandated to be revenue-neutral." So much for that mandate — there's nothing "revenue neutral" about losing $5.1 billion this year and projecting a $14 billion loss in 2012. This murky status as part private business, part government agency hampers its agility. The Postal Service doesn't receive federal funding, but it can't set its own prices or shut down poorly-performing offices without government approval. If I pity the Postal Service at all, it's not because it's a victim of Internet disruption. It's because its leaders are powerless to manage an organization that's hamstrung by mandates and oversight — an organization that's best left to the will of the free market.