The Postal Service’s updated five-year plan predicts mail volume will fall 18% during that period, while delivery points will grow by 5%, or 6.9 million. That, in turn, means revenue per delivery point (household or business) will decline 4%.
Those two projections, combined with ad dollars shifting to electronic channels, means trouble ahead for the Postal Service and its customers, including community newspapers. While privatization is not mentioned, that doesn’t mean forces in other parts of the government won’t be pushing in that direction.
USPS believes “there is an opportunity to reposition the value of mail with businesses, retailers and marketers by integrating digital features with the physical delivery experience to enhance their omni-channel communication and marketing campaigns.”
That’s an ambitious mouthful that will be harder to live up to. USPS wants to reposition mail as a “value-added feature to digital communication.” But regulators (Postal Regulatory Commission or PRC) and Congress might not agree, or at least smooth the way to such a path. And competitors will be fighting to have a say about all of that.
The plan acknowledges the “downward pressure on the growth of parcel volumes … due to continued growth in competition in first– and last–mile delivery services, especially from large retailers (think Amazon) and other domestic carriers using part–time, on–demand workers.”
Package volumes, the service’s chief growth engine, have more than doubled since 2010, but that growth has slowed since 2017. That could decline the next couple of years but is projected (hoped?) to grow slightly after that.
The plan is to strengthen Sunday delivery, expand next–day and same–day deliveries, and enhance return services, among other things. A new Postmaster General appointment is pending, and betting is on an outsider who might have different views about all of this, plus lots more.
LOSSES TO CONTINUE
Annual losses are projected to continue, absent legislative and regulatory changes. The price cap in current law dating to 2008 prevents increases above inflation. And requirements in that law to prepay retiree health benefits, and other fixed costs that increase at a faster rate than revenues increase, all spell worsening results. Even defaulting on some of these year–end, lump–sum payment requirements, the plan projects the Postal Service to run out of liquidity by 2024.
Periodicals could be hard–hit long–term as solutions to pricing are sought by the PRC and by possible Congressional changes seeking privatization or other changes in present law. Periodicals volume continues to decline for the same reasons, hurting Postal Service revenues.
Digital advertising captures more than 50% of advertiser spending and is forecast to continue increasing almost 10% each year. By contrast, the portion of ad spending on direct mail (postage costs only) is expected to decline by almost 5% per year.
Speaking strictly as your columnist, I’ve had plenty of indications that Postal Service efforts to maximize package delivery have made life harder for newspapers. Those copies entered at other than delivery offices can’t get much attention paid to delivery problems within the Postal Service’s “end-to-end” network processing and transportation.
USPS somewhat naturally spends more attention with the growth sector, by both force of volume and preference, and package volume has overwhelmed the ability of the network and its aging facilities, including truck fleet, to cope.
Profitable First–Class mail has declined from 49% of revenue volume in 2007 to just 34% in 2019. Marketing Mail represented 27% of revenue in 2007 but only 23% last year. Package revenues, on the other hand, have increased from 13% of revenue in 2007 to 32% in 2019. But the revenue from packages is much less profitable than First–Class mail, which continues to diminish in favor of electronic options.
Daily pieces per delivery point were 3.8 in 2014, declined to 3.3 by last year, and are projected to drop to 2.6 by 2024, a decline of 22%.
All this is a devil’s stew leading to difficulties ahead for mailers of Periodical Paid and Requester newspapers. Pressure to increase prices is inevitable.
The PRC is now engaged in a second round of proposals to alter revenue-setting mechanisms as part of a required review of the 2008 law. The first proposals were widely panned by mailers and delayed until this new round. NNA is actively engaged in addressing these proposals, which would remove the inflationary cap now in place.
While efforts in Congress to end unfair charges to the Postal Service have failed due to opposition or apathy, they continue under the leadership of Tonda Rush, NNA’s veteran director of public policy. Such charges represent most of the jaw–dropping $77.8 billion dollars in 13 consecutive years of losses.
NNA has fought successfully for many, many years to keep prices low and rules favorable to Periodicals mail. Whether it can continue to do so in face of the market headwinds and financial realities of the Postal Service is an open question. NNA needs your member support, Congressional involvement and revenues to keep up this fight in Washington.
It will be fought on three fronts as usual: The Postal Service itself, but increasingly important, the PRC and the halls of Congress, where headwinds are likely to only grow stronger.
(Max Heath, NNA Postal Committee member, is a postal consultant for Landmark Community Newspapers and NNA members. Email email@example.com.)