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Sunday, January 15, 2006

The Post Office Gets the Email Message

The internet is making it difficult for industries that rely on delivery of the printed word such as newspapers and, as this article describes, the post office. Where the Postal Service is headed in the future is not completely clear:

Saving the Post Office As Mail Usage Drops, USPS Faces a Whirlwind of Change, by Margaret Webb Pressler, Washington Post: There are, in many ways, two U.S. Postal Services. There is the one that people love to hate, ... the Postal Service that made Mark Tornga, 24, hold his head in disbelief as he walked out of a post office ... last week. "Fifty-two minutes I spent in line -- 52 minutes!" the College Park resident fulminated after sending a certified letter ... Then there is the Postal Service that has made huge strides in on-time delivery, runs one of the most impressively automated operations in the world and, for now, is bringing in a huge profit. This is the Postal Service that ... moves 580 million pieces of mail a day with remarkable speed and accuracy to every address in the nation, six days a week.

The first Postal Service is the one that executives are trying to fix... The other Postal Service is the one they are trying to save. "Am I optimistic or pessimistic? I'd have to say I'm anxious," said John M. Nolan, who retired last year as deputy postmaster general... The structural problems facing the Postal Service are monumental. Despite a tiny uptick last year, first-class mail volume is slowly but steadily eroding as people pay more bills online ... and shoot off e-mails rather than write letters. The agency also is facing massive and escalating personnel costs, especially for health care... And finally, there is the federal government's attempt to change the structure of Postal Service regulation, an effort that postal officials regard as riddled with problems and with favors to private industry.

"It doesn't give us nearly the flexibility we believe we need," said Tom Day, senior vice president of government relations for the Postal Service. Without making some hard decisions ... in the near term, Nolan and others say, the Postal Service "is on a crash course with cataclysmic change." What kind of change and when is unclear. Privatization? Shuttered post offices? Dramatically more expensive mail? Less frequent delivery? It could be any of those things -- or none of them. It just depends on how things go...

At its most basic level, the Postal Service needs to keep as many customers as it can, and a good place to start is by tackling its legendary customer-service problems. ... In the meantime, postal officials keep coming up with ways to keep people -- happily -- out of the post office. There are the post office's retail partners, grocers in particular, that sell books of stamps, which has become one of the most common ways people buy stamps. ... There's the ... Click-N-Ship service: Go online and find out the rates, print the postage at home, then schedule a free pickup. The problem has been getting out the word that Click-N-Ship even exists ... Day says even his own nephew was using UPS to ship things he sells on eBay. ... 2,000 postal offices nationwide [have] ... new Automated Postal Centers, which can ... dispense stamp sheets, sell postage..., look up rates and Zip codes, provide certified mail receipts, and so on. To encourage people to use the mail more, the post office has been aggressively advertising some of its newer services on television. ...

Since 2000, the agency has gone through an astonishing makeover of automation and efficiency; reducing staffing by 100,000 to just over 700,000, all through attrition; while delivering more mail to more delivery points. ... What postal officials find most gratifying is that on-time delivery has improved, too: Today, 96 percent of mail is delivered on time ... Eight years ago, that figure was 92 percent...

But these results belie an underlying erosion in the most important type of the Postal Service's business. About two years ago, first-class mail fell below the 50 percent threshold of mail volume for the first time. It now accounts for about 46 percent of all mail, while direct-mail marketing items represent 49 percent. The rest is packages. The package-delivery business is so dominated by UPS and FedEx that the Postal Service now partners with these private carriers... The theory is that it's cost-effective for both if only one delivery person has to walk up to a house. There are even FedEx boxes in some post offices.

The decline in first-class mail is partly because people are writing fewer letters, but it's also closely tied to the banking industry. The more people pay bills online, the more money banks save, so they're making it easier to do. Financial remittances represent about $17 billion of the Postal Service's $70 billion operating revenue, so it's a big chunk to lose. "My concern would be . . . there comes a tipping point ... where ... they may get more aggressive in providing incentives to customers to get them out of the mail," Day said.

To deal with the expected decline in revenue, the Postal Service needs to raise money in other ways and cut costs, and that means several looming battles, Day said. Rates will likely rise again for first-class stamps and for direct mail, perhaps as early as next year, he said. Later this year, the agency will also begin renegotiating contracts with four major unions in hope of winning concessions on some high-cost benefits such as health care. Union leaders are ready for a fierce fight. ... For all the dire predictions mail-industry experts make about the Postal Service, though, there remains an underlying feeling that somehow it will get worked out. It's like this: You just can't let the post office -- the one we feel so connected to -- go away. ...

    Posted by on Sunday, January 15, 2006 at 01:12 AM in Economics, Technology | Permalink  TrackBack (0)  Comments (7)

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