Singing the Postal Volume Blues

Although U.S. Postal Service mail volume was flat in May, that was an improvement over the 2.9 percent decline for the first eight months of Fiscal Year 2017 (October-May). When you include package shipping, USPS volume was up 0.6 percent in May, but remains down 2.4 percent year-to-date.

USPS reported controllable operating income of $341 million for the year through May.

We expect supporters to keep singing the blues about lower mail volume as the main reason they want Congress to act quickly and urgently on postal “reform” legislation.

The problem is that the current postal bill in the House Oversight Committee does nothing the address the main USPS problem of declining mail volume. It has three significant components that affect postal finances. It would shift long-term retiree health care costs from USPS to Medicare, saving the Postal Service significant amounts. It would reduce service to businesses by dropping mail off at one place in a building rather than delivering to each office. Less service for the same postage means more income for USPS. And finally, the bill would raise all postage rates by 2.15 percent permanently. A rate increase would only exacerbate declining volume.

The ten-year rate review underway at the Postal Regulatory Commission is the other main policy lever the Postal Service is pursuing. USPS wants the freedom to raise postage rates higher than the Consumer Price Index (CPI), which is the limit under current law. Again, this “reform” would only make the declining volume problem much worse.

A recent article in Politico titled “The lost genius of the Post Office” lamented the fact that postal innovations to attract and grow business have lagged operational improvements designed to move traditional mail more efficiently.

The doom and gloom atmosphere surrounding the USPS must also be affecting business and organizations’ decisions to use mail. The unprecedented uncertainty about future postage rates is contributing to volume declines. With USPS seeking almost unlimited freedom to set rates, customers are not in a position to plan for future use of mail. The incentives to seek alternatives have been growing.

Trade publication headlines, such as this one in MAIL: The Journal of Communication Distribution, do not help build confidence in mail: “Postage Rates May Soar 5-10% Next 12 Months: Exigent Ghost Haunts Mailers As USPS Presses Congress; PRC Ruling Soon.” Until the uncertain, negative outlook gets cleared up, mailers will be forced to plan for the worst. Postal management would help itself and its customers immensely if it were to debunk worst-case scenarios and give some visibility into the future. But that is not easy, given all the policy balls in the air.

The present isn’t great either. As we have reported before, nonprofit fundraisers this year are faced with large postage increases of over 3 or 4 percent in their workhorse drop-shipped Marketing Mail letters, and a 4.3 percent increase in single-piece First Class letters, a response mainstay. Even with the CPI cap on classes of mail, outsized increases in certain types of mail suppress usage by mailers who operate within budget constraints. And the USPS has promised to continue the large increases in drop-shipped Marketing Mail letters combined with lower rates for origin-entry letters. They justify this counter-intuitive move away from public-private work-sharing based on their re-calculation of “pass-throughs” of avoided USPS costs.

The nonprofit sector in general is not trying to leave the mail and continues to consider it the backbone of fundraising. Unfortunately, mailers are receiving signals from almost every side that mail is not the future. We hope the old adage, “it’s always darkest before the dawn,” holds true.