Postal Service ignores the little guy for corporate mailersMarch 30, 2011
The U.S. Postal Service recently announced that it had lost more than $300 million in its most recent fiscal quarter. The agency looks on track to suffer its fourth consecutive billion-dollar loss later this year — and has warned that it may run out of cash altogether.
Given this alarming financial situation, new Postmaster General Patrick Donahoe is committed to lowering operating expenses in line with reduced mail volume and to searching for new revenue opportunities. USPS is devoting the bulk of its attention to generating new sales from businesses both small and large. One product that has been at the center of a recent advertising blitz is parcel select, a low-cost ground shipping option available only to businesses.
Despite holding monopolies on both first-class mail and the use of customers’ mailboxes, the Postal Service’s future viability does seem to depend on identifying new revenue. But as the government agency seeks to reach new business customers, it must not take advantage of its monopoly consumers.
Americans who rely on the postal service tend to be older and have lower average incomes. Whether they are paying bills, sending cards or letters, or even receiving movies through the mail, they are doing it less often than they used to. But recent proposals, like eliminating Saturday delivery and relaxing delivery service standards, would stick consumers with more than their fair share of the burden for a failing postal service business model, while new deals are created for corporate mailers.
One of these is parcel select, a lower-cost commercial shipping option that encourages businesses to partner with big commercial shippers, who transport packages outside the USPS network and drop them off at a postal facility farther down the delivery chain. The Postal Service charges a business based on where its packages eventually enter the mail-stream, whether at a bulk sorting facility or at the appropriate local post office. The farther down the stream, the less the firm pays.
In theory, everyone benefits. Local post offices don’t have to sort packages headed for all corners of the country. Businesses can save money on shipping by presorting their packages themselves and relying on consolidators to deliver them all to a few central locations. And shipping companies make money by delivering bulk packages more efficiently than the Postal Service could hope to do.
In short, parcel select is one of the best deals the Postal Service offers. But ordinary Americans — its household, monopoly consumers — aren’t eligible to get in on it.
Instead, USPS provides rebates to its biggest parcel select customers — potentially forgoing much-needed revenue. Businesses whose annual parcel select bill exceeds $5 million qualify for a 0.25 to 1.5 percent “Loyalty Rebate.” They can receive additional rebates, with savings of up to 14 percent, if they increase their shipping volume by at least 10 percent within a calendar year.
So while the Postal Service’s strategy for marketing parcel select seems to be working — volume for the product was up nearly 20 percent last year — it doesn’t benefit consumers.
Worse still, because parcel select doesn’t contribute much to the postal service’s tens of billions of dollars in institutional overhead, its packages are getting a free — or at least discounted — ride. Individual customers, meanwhile, are forced to subsidize the service and its corporate customers every time they buy a first-class stamp, a transaction that contributes far more to the agency’s bloated overhead.
With its emphasis on parcel select and other initiatives to attract new revenue from corporate mailers, the U.S. Postal Service seems less interested than ever in serving its ordinary, monopoly consumers. And that is a problem in just as much need of a solution as the organization’s multibillion-dollar deficits.
Don Soifer is executive director of the U.S. Consumer Postal Council, www.postalconsumers.org.