If “when God closes a door, he opens a window,” then when the Internet closes a door, it blows up a wall. The internet has allowed for the explosion of creative new media like Humans of New York while traditional newspapers have been devastated. It’s sent traditional retailers to the poorhouse while making e-commerce a $600 billion a year industry. It’s chased people out of movie theaters and onto online streaming services. And on and on and on.
One of the last hold-outs here is the U.S. Postal Service, which has seen demand for its hallmark product, First-Class mail, fall through the floor. While Americans sent 82.7 billion pieces of First-Class mail in 2009, in 2019 they sent just 54.9 billion, according to Pew Research. But people don’t just send fewer letters than they did 10 years ago; they send fewer letters than they did one year ago: 1.7 billion pieces fewer this year than in 2019, according to an agency financial statement.
But while the internet has closed the door of First-Class mail, it’s absolutely blown up the wall of package delivery. In 2015, the post office shipped 4.5 billion packages, but in 2019 it shipped 6.1 billion – a rise of 36%. Whether it’s Goliaths of the e-commerce world or little Davids with home-grown Etsy stores, e-tailers have seen a massive rise in the demand for packages delivered straight to their customers’ homes.
The current pandemic crisis has fueled ever more demand for people stuck at home. Package shipping is up nearly 50% this quarter from the same time last year. Given the consensus that many COVID-inspired changes are going to stick around for good, the post office can expect there will be consistently high demand for its package-delivery going forward. Good news for the fiscal future of the post office, right?
The post office has lost billions every year for the past 13 years. The agency’s operating expenses have accelerated by a margin of $9 billion above what USPS had on its books six years ago. And cost growth is as high as 10% in recent months as parcels inundate the system. USPS CFOs have made grand promises about its long-term financial stability since 2007, but haven’t made any systemic changes since then, nor delivered the 10 year business plan the agency promised a year ago.
The first thing one has to acknowledge is that – rain, sleet, snow, and hail aside – packages are a little harder to ship as efficiently as mail. Since there’s no uniformity of size and shape among packages every company and individual ship, they’re harder to all cram into the same truck as when Nike ships shoe boxes. This fact is even mentioned in an episode of The Office.
One effort the USPS mounted to deal with this was the so-called “network rationalization” in 2015 to degrade mail and slow it down, a plan to save billions of dollars that netted only about 5% of expected savings. It hasn’t helped that the post office gave away the farm with a $1.46 subsidy to every box it transports to lure e-tailers to stick with them. The USPS probably doesn’t want Amazon to come up with its own delivery service, but it can’t continue to lose money on what is now it’s most valuable service as the president, quite rightly, proclaimed in April.
The responsibility for saving the future of the post office lays with Postmaster General Louis DeJoy, who has the unenviable task of navigating the choppy waters of the modern world in a ship designed in the 1800s, staffed by bloated federal bureaucrats, and beset on all sides by Democrats who’d rather see the government fail than the Administration succeed.
Due to costs and strain that they put on the entire system by COVID and otherwise, there is reason to question how eCommerce is negatively impacting the performance of both letter and package mail, especially at this time when mail performance is such a hot button issue.
For years, USPS has fallen short of its responsibilities as First-Class mail, its one-time cash cow, is no longer performing and its new star, package shipments, is enjoying a needless subsidy.
Fingers crossed that DeJoy will be around next year to try to get the ship back on course, and one hopes he gets a commensurate reward for his leadership. If he succeeds in the face of all these challenges – unlike the lady in Air Force One – the Postmaster General can’t be rewarded with being Postmaster General.
Jared Whitley is a longtime DC politico, having worked in the US Senate, Bush White House, and defense industry