The US Postal Service is drowning in red ink to the tune of $3.8 billion, and now, there's a proposal from Postmaster General John Potterto to cut Saturday deliveries. Is it in its long-term best interest to do so?
The USPS already made $5 billion in cuts, and it needs to take drastic measures. Mail volume has declined from 202.7 billion in 2008 pieces to 176 billion in 2009. With the increasing growth of electronic communications, it seems this volume will only continue to slide.
But in a 24x7 world, is this the right direction to go?
The experts who analyze postal economics are divided on the question. Seung-Hyun Hong, an economist at the University of Illinois, says projected savings from weekday-only delivery could wither "if the move chases away lucrative business customers who count on the mail to blanket homes with coupons, fliers and other advertisements." He adds that "there needs to be more study to gauge the revenue impact if services become less frequent and less reliable,” he said. “Most residential customers probably won’t care, but some businesses might and could try switching to the Internet.”
Several other experts weighed in on the Postal Service's proposal in a New York Times report:
Rick Geddes, associate professor at Cornell University and author of “Saving the Mail: How to Solve the Problems of the U.S. Postal Service,” observes such a cut would be "consistent with other mail systems like Australia Post, which does not deliver on Saturdays. It’s also consistent with past U.S. practice, where delivery frequency has changed drastically over time." At one time, in fact, mail was delivered twice a day.
However, Fredric Rolando, president of the National Association of Letter Carriers, says cutting Saturday deliveries is not good business. "Tens of billions of invoices and payments move through the mail," he says. "Thousands if not millions of businesses and their customers rely on Saturday delivery — including fruit shippers, mail-order pharmacies and weekly news magazines. Permanently downsizing service to meet a depression-level of demand is premature and short-sighted.... In the long run, it will result in lost business and revenue. Diminishing the value of the postal network to fast-growing companies like e-Bay, Amazon.com, Netflix and Caremark, among others, would be penny wise and pound foolish."
Michael A. Crew, economics professor at Rutgers University, believes that "current proposals reflect [the Postal Service's] lack of a business model.... The proposal to eliminate Saturday delivery could pose serious problems. It could cause a further decline in demand. Currently the Postal Service 'owns' Saturdays as its competitors do not provide normal deliveries on a Saturday. Eliminating Saturdays may be a further blow to its competitiveness. The Postal Service needs fundamental reform and it needs to develop a business model that will help it address the competition it faces. Postal services in the Netherlands, Germany, Sweden and Australia, for example, have had success moving in the direction of privatization and commercialization"
However, USPS will probably prevail in one form or another over the long run. As Hong at the University of Illinois points out, despite financial problems, high-tech competition and a push for a paperless society, the Postal Service will endure. “People are always going to need to send mail,” Hong said. “It’s not going to disappear.”
There may be debate over whether Saturday deliveries make economic and business sense, but everyone seems to agree on one thing: the US Postal Service needs to function and plan for the future in the same manner as any for-profit business. But it has been a difficult transition for this organization -- what was a virtual information-delivery monopoly just a couple of decades ago is beset by competition from all directions.
This post was originally published on Smartplanet.com