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  • Why The Post Office Is Doomed

    Posted by Carl from Chicago on January 20th, 2014 (All posts by )

    The United States Postal Service (USPS) is in bad financial shape. The service is currently losing money and is unable to pay some required payments to the government for employee retirement benefits. While the USPS has retained its first class mail monopoly, it sends only a small percentage the ecommerce packages that are the backbone of the physical internet economy.

    The real failure of the postal service, however, is encapsulated in the photo above. In our River North neighborhood, where the population density is high (local residents in high rise condominiums plus innumerable tourists) and the value of real estate is high, too, there is one institution that you can count on to not shovel their sidewalk or take care of their property. The US Postal Service.

    The employees of the USPS are unionized and likely no one has the job of shoveling the sidewalk, or it isn’t in their job description. Thus it isn’t shoveled, and you need to trudge through it which becomes treacherous as the snow melts and re-freezes. Since many of the people who actually might want to use the postal service in this area are elderly, the dangerous sidewalks are even harder to defend.

    They also used to have two mailboxes in the “drive up” section where you can pull your car up to the curb in front of the River North post office. Recently when I attempted to mail Christmas cards (we don’t like to leave them with the mailman in our condominium building because we’ve heard horror stories) at the post office, I couldn’t stuff them into the mailbox, because they reduced capacity down to a single mailbox. There were a few other potential customers milling around fuming as well, since the outdoor mailbox had apparently been jammed beyond capacity for some time.

    The difficulty with the USPS is that unionization and inability to react to market forces and plan for disruptive technologies ensures that they will not find innovative ways to make money and remain a viable institution. It is unfair to summarize that the people at the post office are lazy or inflexible; the point is that their institutional culture and mission dooms them to failure. In a privately run business, a local manager would ensure that the sidewalks were passable and that customers would not stand fuming outside the door because during a time of peak need, capacity had been pulled away.

    The USPS has substantial assets that it could call upon in its (theoretical) reinvention, including a vast door-to-door distribution network, valuable real-estate that could be sold or leveraged (this building in River North covers an entire block and must be worth between $50M – $100M), and a large work force that could potentially be utilized for additional revenue generating services (such as selling banking or telecom products). Mail services in Europe have been successfully privatized and yet they continue to deliver their “core” mission.

    However, the USPS generally falls back onto their usual “monopoly” strategies, including 1) leveraging their local congressman to ensure that facilities are not reduced in their district 2) touting how they pay above-average wages and benefits and provide a “middle class” lifestyle to their workers 3) touting the “one rate anywhere” nature of the US mail service, meaning that you can send a letter from Barrow, Alaska to a small town in Florida for the same rate as sending to someone in your own home town 4) using “attrition” as a strategy where when individuals retire (usually before 65), their job is not replaced or reducing key services such as shutting Saturday mail delivery to save money.

    The USPS had many opportunities to rebuild itself – they could have developed an “official” email address and process for governmental benefits and services, they could have led the enormous package revolution that was tied to e-commerce, and they could have found a way to leverage their distribution and local retail sales forces into adjacent products or government benefits. Instead, they made marginal efficiency improvements and continued with their “regulatory / monopoly” strategies listed above.

    The failure to shovel sidewalks in a major urban area and to plan for minimal items related to customer convenience is emblematic of the “not my job” monopolistic / governmental thinking that permeates this entire institution from top to bottom, and combined with their “regulatory” strategy of not shutting individual non-economic components of their operations, ensures a slow to rapid bleed to death of the USPS in its current form.

    Cross Posted at LITGM

     

    25 Responses to “Why The Post Office Is Doomed”

    1. John Says:

      Re: overloaded mail boxes

      Any rational business would empty the mail boxes when they were full instead of on a schedule.

      And, yes, my local post office runs on a schedule.

      Regards,

      JJ

    2. TMLutas Says:

      The post office isn’t necessarily doomed but its been given a tall order to actually fully fund their pensions after many years of being able to pretend that liabilities aren’t liabilities. So now they’ve got about 10 years to catch up. I’m not terribly upset if they miss their 10 year goal and do it in 11, even 12 years.

      Successfully fixing the legacy pension problem will make privatization practical. Who would want to take on a USPS that is $46B in the hole on future obligations?

    3. Michael Kennedy Says:

      I ordered an underwater camera for my grand daughter who has begun surfing (She is 11). I ordered through Amazon Prime which promises delivery in three days. The outside vendor sent the camera by USPS (no doubt cheaper than Fedex) and it finally arrived several days after Christmas and 10 days after the order. I had already bought the same model at a Best Buy store on 12/26 and I returned the camera (about a $250 item).

      I ordered two sweaters from an online vendor (Not a good idea) and they finally arrived more than two weeks later and two weeks after Christmas. I ordered similar items for the Dartmouth Coop and they arrived in three days. The difference ? USPS.

      I have noticed the Post Office in Mission Viejo has extended hours. Maybe they are paying attention.

    4. Douglas2 Says:

      The uncleared snow is especially ironic given the regular press releases sent out by post-offices that still do delivery to the door, asking customers to keep their walks and porches clear.

      I’m wondering with the USPS as a quasi-federal corporation what recourse the city would have if citizens started noting the specific street address and calling 311 to make a “Snow – Uncleared Sidewalk” request with the City of Chicago 311 Service Request Line.

    5. Grurray Says:

      I ordered some items on Amazon recently and they shipped USPS. Items were supposed to take 3-5 days but didn’t arrive until 3-1/2 weeks later.

      They provided all the tracking information. It took 3 days just to get out of the facility the seller dropped it off at, then 5 days to our local USPS distribution center (about 500 miles).

      Then the package got stuck at the distribution center for 2-1/2 weeks. The frustrating thing was it was only ten miles away from my house, but they wouldn’t let me come pick it up. Every day I would see “Package has left the carrier facility” but it really didn’t move.

      Customer service was useless. They had no idea what was going on at the distribution center and no effective way to contact them apparently.

      I Googled that distribution center, and it had pages of complaints about being a black hole for packages.

      Now for every Amazon order I contact the seller and if it’s shipping USPS I don’t place the order.

    6. dearieme Says:

      You guys tend to mock Europeans as “socialists” but it’s the European mail services that are being “privatised” i.e. turned into public companies. We bought shares in the (British) Royal Mail, and may buy more when the next tranche is sold.

    7. Michael Kennedy Says:

      “Now for every Amazon order I contact the seller and if it’s shipping USPS I don’t place the order.”

      Good idea. I’m a member of Amazon Prime but it didn’t help with that guy.

    8. Sgt. Mom Says:

      Gurray, my daughter had the very same problem with some items she had ordered from Amazon – Although she is an Amazon Prime member, the items went USPS for the last leg and simply disappeared into the distribution center for weeks.

    9. Mark Says:

      If I ran the USPS (ha!) I’d be snapping up old fast food joints just for the drive-thru’s. I bet well over 50% of customer visits could be handled in 2 minutes or less.

    10. Jonathan Says:

      Dearieme, a valid point. Also true WRT air traffic control.

    11. Joe Wooten Says:

      Dearieme, if the privatized mail services are still a monopoly, then they are not truly privatized. They are just another form of crony capitalism, which in itself is a mutation of the old fascist corporate atate.

    12. carl from chicago Says:

      I agree that there are many things that we can learn from the Europeans. For instance, some of the most intelligent businessmen that I have ever met came from France. You can’t stereotype a continent.

      However, what ails Europe is what ails the USPS. They have overlaid a status quo model atop people that could otherwise be productive world beaters, through socialistic tendencies and barriers to the market.

      There are 500,000 individuals working at the post office. My grandfather worked for the post office. For many years the post office used to be at the forefront of technology, as they sought out more efficient and faster means of delivering the mail. You can’t summarize all those people – they are unique individuals.

      However, the system and operating model that they are using collectively is terrible and will result in the death of their institution.

      The government should reduce benefits and take the liabilities for ex workers off their hands and give the private sector (under some constraints) the ability to take on the role of the USPS and try to salvage value out of the system.

      In general – the fact that junk mail piles up (unreliably) on my doorstep while I subsidize the guys’ mail from Alaska to Florida isn’t a positive element as far as I am concerned. First class mail is dying as everything goes electronic and even xmas cards are dying off. They need to leverage their network for packages or get out of the game. The offices should be turned into benefit centers where people can come in if they can’t get things online, and would serve myriad government clientele. Just my 2 cents.

    13. Jimmy J. Says:

      I worked for a summer in a small town USPS Office in 1948. The Postmaster was very cost and service conscious. All the workers were pushed to deliver mail and serve the customers as efficiently as possible. I consider it to be one of the most demanding jobs with a stickler of a boss that I ever held. There was no union in those days and very few people other than the Postmaster considered working there until retirement.

      I don’t know when the USPS was unionized, but it is obvious why things are going badly whenever you visit a local PO. I have never walked into our PO in the last sixteen years when there wasn’t a line and quite a wait. The clerks never seem to hurry or try to do anything to shorten the wait. I’ve even seen them close a window with many people on line and it seems that all the customer windows are never all manned at once. Only the DMV is worse.

    14. Michael Kennedy Says:

      “For instance, some of the most intelligent businessmen that I have ever met came from France. You can’t stereotype a continent.”

      The young French computer professionals say that France has a Silicone Valley but it is in the Thames estuary. That, at least, was whenThatcher was PM. I don’t know about now.

    15. PenGun Says:

      I always use USPS for shipments to Canada. UPS has ripped us off for many years, comes from starting out as a border broker, and most Canadians avoid them. USPS is quick, has tracking and often the stuff just floats through customs, which can be a big benefit.

    16. Bill Brandt Says:

      Over Christmas it was the USPS that looked better than UPS or FedEx – they really got hit with unexpected volume and a lot of people didn’t get presents by Christmas.

      That being said one of their big problems is not being able to lay off or fire any of their unionized workforce – but then too any cost savings they want – such as closing post offices that are lightly used, is always political with Congressmen interfering. Seems like they got the worst of all worlds when Congress “set them free” all those years ago.

      When I had my business we used to have a UPS account – the driver would stop by every day for the pickups – and from the time I closed the business – 2007 – I was shocked at how much the retail rate for UPS had gone up.

      One of the best shipping values is the flat rate USPS Priority Mail boxes. I sent some brake pads back across the country – 2-3 day delivery – for $5. I’ll bet UPS would have wanted $15 – or more – for ground service taking 5-7 days.

    17. TMLutas Says:

      The Post Office is doomed like US rail was doomed. Change the legal environment and things become undoomed. The package delivery ecosystem requires somebody to occupy the post office’s niche. This is why you see UPS and Fedex doing deals with the USPS. They need what the USPS has. They won’t buy the USPS now because of all those unfunded liabilities on their books. Once that liability goes away, it will be a new ball game. This is one possible future, being broken up and the useful parts sold off to the private carriers.

      Another future might be that the union sees the writing on the wall and the USPS gets its act together to retain the value in the brand and to build on that to buy itself out for a better price. The first class monopoly still goes away but so do all the restrictions on what it can do with all those sites. The increase in activity from being able to drop postal rates after the pension catch up leads to profitability and an increase in the union’s rolls. Not having to politically set their bulk mail rates gives them enough breathing room to move into new lines of business.

      The latter may look like a pipe dream but I say it’s no less likely than some of the real life resurrections of communist era brands. They’re out there in E. Europe with improbable logos and surprising turnaround stories.

    18. IGotBupkis, "'Faeces Evenio', Mr. Holder?" Says:

      1) I disagree with the assertion that one price alaska to florida for first class mail is actually a significant cost factor. I’d challenge you to demonstrate that the majority of the cost of transport is not in two arenas — first, the labor involved in pickup and initial sorting — second, the actual placing it into the mailbox at the end. Equally critically, there’s a maxim: “Civilization advances by increasing the number of important things one can do without thinking about them”. This has a kind of deep profundity that it takes a little time to truly process. Making postal rates region-variable would be a step backwards, not forwards, because now you have to worry about where it is going instead of just “stick a stamp on it, drop it in a box, and go”. Instead you’d have to look up the region the address is in, then look up the rate, then get the correct postage onto it… itself not a simple problem if you’re running out of “penny” stamps. And I’ll point out it adds another step in the chain for the USPS, which must now verify not “it’s got a current stamp on it”, but actually check the address for region, THEN see what stamp belongs on it. The complexity chain this adds — for both the consumer and the USPS — for a simple one-ounce envelope, which gets processed literally millions of times a day, is almost certainly not worth whatever minor savings could be had by variable postage. When packages are heavier, as with the typical thing carried by UPS, this is much less likely to be the case.

      Phone, cell phone, and data usage all take off once you get to the “one price” model — because now you can use it without thinking about it. One can almost certainly argue that the opposite would reduce usage. So a variable postal rate would likely REDUCE the usage of the USPS, excepting for junk mail, which I’d suspect would be largely unaffected. So no, please, I argue you need a lot more research to make the claim that a variable rate postage system in the USA would be a good idea.

      2) The key tech failure of the post office is remarkably obvious — they went on a boondoggle hunt for reliable handwriting recognition in the 60s or 70s as the tech solution to their problems, when barcoded addresses would have been capably, and more critically reliably, possible about 30 years ago, meaning you’d need all of two human handlers of all pre-barcoded mail: the guy who hauls it out of the initial mailbox and the guy who puts it into the endpoint mailbox. All the rest, including the sorting, could be done via machine for probably 98% of all mail — Yes, I know they use barcodes for junk mail… the thing is, it should long ago have become the standard for ALL mail, with reduced stamp prices for any pre-barcoded FC mail to encourage people to download and use a barcode printing app with labels, or, alternately, use a barcoding-address machine present in any post office. I’m sure Pitney-Bowes would have jumped at the chance. Equally critically, given the standardized boxes they’ve been pushing, you could probably have designed those so that, most of the time, they could have been auto-stuffed by a robot that was supervised by a human, with likely far greater speed and considerable accuracy, thereby increasing the size of the typical postman’s route.

      3) I suspect part of your problem with USPS may be Chicago, not USPS itself. Along with the fact that you are, after all, concerning yourself with Xmas delivery schedules — even UPS had some problems with that this year, as I recall. I suggest your USPS issues are localized, because I’ve found much less issue with my local USPS here in Florida. Maybe Florida, or even my own region, is just that good, or perhaps Chicago is just that bad. I have no evidence to support that either way.

      This is in no sense a defense of the whole lame USPS idea, it’s just saying that it’s not as bad as all that in at least some locations. I stick something in the mail, locally, it’s usually delivered within 2-3 days — the biggest problem is the failure of so many public mailboxes to be serviced often enough to ACTUALLY get it “into the system” with alacrity. If I drop something for local delivery off at the PO itself, it’s usually delivered the next day.

      On a related side note, the DMV in at least this part of Florida is also a hell of a lot better than it was 30 years ago, and a hell of a lot better than the universal DMV reputation. Some of the improvements are the kind that pretty much have to be statewide, too.

    19. Michael Kennedy Says:

      “the DMV in at least this part of Florida is also a hell of a lot better than it was 30 years ago”

      The DMV in Arizona is so much better than California that it is almost a pleasure to go there.

    20. Ginny Says:

      We get Amazon stuff in 2 days on a pretty regular basis. I’ve never had a problem with the post office in my relatively long life until lately. Our route postman appears dyslexic: mail goes to those with our address transposed in some way – and we get mail addressed to others. Usually someone shows up at our door with our mail and we drop it off or forward it, but sometimes – like right now – orders have been missing a week. Unions, probably. Lack of reading skills, probably. Attitude, well that transcends the post office. I asked a guy at Target if they rented carpet cleaners; he asked the girl standing beside him and she said she’d already clocked out. (They didn’t was the answer – not exactly a clockable moment.)

    21. IGotBupkis, "'Faeces Evenio', Mr. Holder?" Says:

      Lack of reading skills, probably. Attitude, well that transcends the post office. I asked a guy at Target if they rented carpet cleaners; he asked the girl standing beside him and she said she’d already clocked out. (They didn’t was the answer – not exactly a clockable moment.)

      Just curious what region/state you live in, if you feel like sharing…. Wondering if that’s a local thing, I’ve suspected that attitude like that comes with the area you live in, sometimes. Union attitudes seem to infect people outside the unions.

    22. brian Says:

      fascinating article about the Chicago post office in the New Yorker. several years back, read that and you will understand why your mail “disappears” there.

    23. Grurray Says:

      Inexplicably, Amazon has found a way to screw up their Prime membership.
      It’s called UPS SurePost. UPS ships the package long distance then hands it off to the local post office for final delivery.
      What could go possibly go wrong with that arrangement?
      So much for two day delivery. This has got me now questioning my entire membership

    24. tomw Says:

      IGotBupkis 2:54

      The USPS has a discounted rate granted to mailers who print a barcode along the bottom edge of the envelope.
      If you look at your utility bill, given that they have not forced you to electronic billing, you’ll see a barcode printed by the utility. I believe in their case, they pre-sort the mail for delivery as they print the bills & envelopes.
      A recently received envelope, private mailing, has a barcode printed on it also, I assume done in the local sending post office.
      When the presorted rate was announced, it was expected at that time to make the same rate available to consumers if they would barcode their outgoing mail.
      It never happened.
      Recent packages sent pre-Christmas, from the same post office, had completely different outcomes. The package mailed on a Saturday arrived on the following Monday. The package mailed on the next Tuesday arrived ten days later.
      tom

    25. Carl from Chicago Says:

      They just raised the price of a first class stamp to 49 cents.

      I’m sure that will cure all their ailments.

      Another step in the self-fulfilling death spiral of reduced demand and higher charges that reduce demand.

      Next step is likely to reduce the quality of service.