AT&T used to make phones and run the nation's telephone infrastructure. Now it's largely a wireless company. IBM and Hewlett-Packard transformed themselves from equipment manufacturers into business-service providers. Airlines have slashed service to small cities and added new fees for food and baggage. General Motors axed four of its eight divisions and fired two CEOs in less than six months.
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Nobody likes radical change, but in corporate America, it's sometimes necessary to survive. Except at the U.S. Postal Service, which tries to act like a corporation but inevitably struggles to keep up with the times. The Postal Service is an odd institution, an "independent establishment" of the government that nonetheless has to abide by rules that virtually force it to lose money. It has a CEO and an 11-person board of governors that functions like a board of directors. It files an annual financial report with the Securities and Exchange Commission, like any publicly owned company. Yet the law requires the Postal Service to deliver mail to every address in America at prices that often fail to cover costs. It's not allowed to lay off workers or close money-losing offices, and to make major changes it usually needs permission from Congress—which practically guarantees government-style inefficiency.
If the Postal Service had real stockholders, they'd be selling shares like mad. The business of mail delivery is in natural decline, thanks largely to E-mail and the Internet. The Postal Service expects its volume of business to fall 15 percent by 2020, with its main revenue generator, first-class mail, falling faster. There are nearly 37,000 post offices in the United States, almost three times the number of McDonald's restaurants. The typical post office serves just 600 customers per week, far less than what it takes for a retail establishment to stay in business. On its current course, the Postal Service will lose $238 billion over the next 10 years, which is twice what the government has spent so far to bail out Fannie Mae and Freddie Mac.
The postmaster general, John Potter, has a plan. He wants to eliminate Saturday delivery, raise stamp prices, close hundreds of low-volume post offices, and open up smaller outlets in places where people naturally congregate, like grocery stores and shopping malls. He'd also like to offer nonpostal services at the post office and sell postal products in other retail outlets, to bring in more revenue. Those are all reasonable ideas. But they're incremental at a time of revolutionary change. And as a starting point for negotiations with Congress, they're likely to be dialed back to a point of insignificance.
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For a preview of what the Postal Service will soon face, consider what has happened to the music, travel, and media industries. Total music sales have fallen by more than 40 percent since 1999, according to the Recording Industry Association of America, since buyers can now download just the tracks they want instead of buying an entire CD. Travel agents have nearly become extinct, thanks to travel-booking websites and airlines offering flights direct to consumers on the Web. News organizations are in crisis, with revenue and employment falling by double digits as more people get their news online, usually free.
Companies that react to transformational force with marginal change don't last very long, and minor tweaks to the Postal Service's business model could leave it just as bankrupt as Tower Records or the Tribune Co. So here's a more radical idea: Cut mail delivery to three times per week, instead of six days now or the five-day schedule that Potter proposes.
There's no doubt it would save money. The Postal Service currently delivers to about 150 million U.S. addresses, earning about $1.40 in revenue for each stop, or $210 million per day. With volume declines, by 2020 it will deliver to 162 million addresses but earn just $1 per stop, or $162 million. That's less revenue for more work. Cutting delivery days in half would cut costs significantly, while total revenue would remain roughly the same. It would also align the Postal Service with other agencies that will inevitably be forced to slash spending as the government's debt crisis mounts, and it would force the organization to develop new offerings for smart phones, iPads, and whatever comes next, instead of just talking about it.
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Besides, most of the mail can wait a day—or three. According to data compiled by Boston Consulting Group, ads, promotional material, newsletters, fliers, catalogs, and postcards account for about 60 percent of all mail. That's hardly urgent material. Bills, bank statements, and payments account for 20 percent, but that's going down as more people handle financial transactions online. Personal letters represent just 6 percent of the mail, and magazines, packages, business correspondence, and miscellaneous stuff account for the rest. For most people, getting the mail every other day would be no more disruptive than reading the news on a computer screen or booking a trip on a website.
There are exceptions where an added delivery day matters. But those would qualify as priority items that could always be delivered under the Postal Service's other line of business, shipping, which includes priority mail and competes freely with FedEx, UPS, and other delivery companies. The system could also be changed so that people would have the option of picking up their mail themselves on Tuesday if they couldn't wait for it to be delivered on Wednesday. And there could be exceptions for unusual items that are time-sensitive and qualify for low-cost delivery.
Another consulting firm, McKinsey, highlighted three-day delivery as one of several ways the Postal Service could close its budget gap. Other options include slower delivery for first-class mail, price hikes for periodicals and other mail that the Postal Service loses money on, and delivery that stops at the curb or at "cluster boxes," instead of on every American's front porch.
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This is Washington, of course, and there are plenty of reasons why the mail will continue to arrive more frequently than necessary as postal losses mount. The postal workers' union opposes sharp cutbacks in delivery, for obvious reasons. Advertisers, businesses, magazine publishers, and consumers would all have to make adjustments if mail service were cut in half, and lobbyists get paid well to make sure their clients suffer no discomfort. There's also the romanticized notion of the mail carrier braving the elements to deliver a heartwarming missive from a lover or distant family member, which still moves lawmakers even though lovers communicate by text messages and Skype these days. Maybe, someday, the Postal Service will offer Wi-Fi while you're waiting in line for your stamps—and a latte.
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