WASHINGTON – What business gets more customers every year, yet keeps losing money?
The U.S. Postal Service delivers mail to 11 million more homes, offices and other addresses than it did a decade ago, even as the amount of mail that people in the United States receive has dropped sharply.
That combination may be financially dicey, some analysts say.
“The more delivery points they have to service, the higher their costs” in fuel, time spent, etc., said Rick Geddes, associate professor in Cornell University’s Department of Policy Analysis and Management.
“But it doesn’t mean their revenue goes up – it doesn’t necessarily mean people are mailing more stuff,” he said.
Indeed, the volume of mail has decreased steadily as more people stay in touch through email, Facebook and other electronic services. Total mail volume handled by the financially shaky postal agency dropped to 160 billion pieces last year from its all-time high, 213.1 billion in 2006. Revenue fell to $65.2 billion last budget year from a high of $74.9 billion in 2008.
The cost of delivery is the agency’s largest fixed expense. It takes tens of billions of dollars a year and 300,000 people, or 60 percent of the agency’s workforce, to handle deliveries, said Postal Service spokeswoman Sue Brennan.
The service isn’t losing money on delivery, but adding addresses while losing volume is an issue, she said.
“In 2007, we could deliver 10 or 15 pieces of mail to a house, and we were making a lot of money just because the volume was so high,” she said.
Those times have ended, but the mail carrier is still required to go to every address, six days a week, whether taking 15 pieces there or one.
The number of new addresses had been rising by roughly 2 million almost every year since 1989, but that was cut in half to 1 million or less annually during the recession and housing crisis.
With the economy improving, the constant march upward in the number of places the postman has to serve is expected to accelerate. The Commerce Department reported last week that spending on home construction rose in February to the highest level in more than four years and also was up for office construction and health care facilities.
Some analysts see more addresses as an opportunity for the Postal Service, as long as the agency can adjust to changing times and demand.
Scott Van Derven, a letter carrier of 30 years, said he expects to see a couple thousand new delivery points on his downtown Milwaukee route in the next year. Projects that stalled when the housing bubble burst are starting to go forward now. New buildings will go up, and old industrial ones will be turned into apartments or other housing that he believes will draw young professionals.
Van Derven envisions bringing them mail sacks full of professional magazines and catalogs from home furnishing stores as they decorate their new homes. He also predicts more packages in his future – lots of packages, which are the Postal Service’s fastest growing business because more people are buying things online.
Also, he said, “The people in this age category go crazy for electronic stuff, and it comes through the Postal Service.”
It’s not just a matter of mail volume and the number of addresses but also where the increase is and what type of delivery is used.
Urban renewal of the kind Van Derven is talking about means he’ll be able to service hundreds of mailboxes with one stop, in an apartment building lobby, for example. That’s faster and cheaper than repeated door-to-door stops required for thousands of single-family houses spread across suburban sprawl.
The agency has been able to hold down delivery costs by convincing more business parks and shopping malls over the years that customers should pick up their mail at a centralized spot on the site, rather than having it delivered to individual businesses.
Some housing subdivisions, likewise, now have “cluster boxes” that stand in a central spot to serve groups of homes.
A huge time savings also has come from investment in machines that sort piles of mail. Carriers once spent several hours daily manually arranging mail before they went out to their routes. Now they spend perhaps a half-hour in the post office and the rest of the time on delivery, meaning that routes have become longer and that fewer carriers are needed even as addresses increase.
But all this is not the Postal Service’s biggest financial headache.
The majority of the service’s nearly $16 billion loss last year stemmed from a 2006 law Congress passed forcing it to pay into future retiree health benefits, something that no other agency does. That was $11.1 billion of the year’s total loss.
An independent agency, the service gets no tax dollars for its day-to-day operations but is subject to congressional control. Many analysts lament that it has to manage 500,000 employees, a fleet of 212,000 vehicles and thousands of pieces of automated equipment but is not allowed to make what they say are typical business decisions.
“Congress should give the agency authority it needs to act like a real business,” said Geddes, the Cornell professor, meaning respond to customer demand by controlling prices and adjusting levels of service when needed.