Amazon is one of the only things keeping the US Postal service afloat

http://www.vox.com/2014/9/24/6829335/us-postal-service-post-office-charts-amazon-fedex-UPS

The US Postal Service does a staggering amount of work, when you sit down and really think about it: it delivers 158 billion pieces of mail per year, the vast majority of them on time. And it also has some staggering financial problems: the GAO reported earlier this year that the USPS has $100 billion in debt and unfunded liabilities related to retirees' pensions and health benefits.

All of those troubles have a lot to do with digital communications — it's quicker to send Grandma an email or even a text than a card — but there are plenty of other moving parts. Here are 9 charts that explain what's going on with the US Postal Service.

1) The westward spread of postal service

The US post office underwent some fantastic growth in its early years. In this video from data visualization pro Derek Watkins, you can watch the post office grow from 75 offices in 1789 to nearly 77,000 in 1900. The number of offices would peak in 1901, at 76,945, then start to decline after that with the advent of rural free delivery, which eliminated the need for many offices.



So while the USPS closes post offices today due to shrinking revenues and postal service usage, the decline in post offices has been going on for a century. As of 2013, the total number of post offices stood at 26,670. Since 2012, the postal service has closed 141 facilities as part of a cost-cutting strategy it calls a "network rationalization plan." While the USPS had planned on cutting more than 3,600 offices as of 2011, it eventually decided to instead slash hours at rural offices.

2) The fast death of your friendly neighborhood mailman

 

Of course, as the USPS grew, so did its ranks of employees. The number of workers skyrocketed as the population (and therefore number of customers) likewise grew, but in the last decade the postal service has aggressively cut back on workers. Today, there are just under 500,000 workers, down by around 300,000 from the nearly 800,000 there were in 1999.

The postal service has been cutting its workforce through attrition — simply not hiring people to replace its retiring workers, as Government Executive reports — and is also offering buyouts to some postmasters, hoping they'll retire early. But the agency could cut some of those workers through layoffs, if they do not accept buyouts or get other postal jobs. Postmaster General Patrick Donahoe has said he wants ultimately to shrink the workforce down to 400,000 workers by 2017.

3) The check is not in the mail

Starting in 1886, the first year for which continuous data starts to be available (though data doesn't exist for most of 1914-1925), the amount of mail the USPS handled took off, growing exponentially until around 2000. But then email and online bill pay helped drag mail volume down sharply starting in the mid-2000s.

4) Lots of work for far fewer workers

The number of postal workers may be shrinking, but the efficiency of the USPS has grown relatively steadily since 1926. Today, the USPS is handling nearly 325,000 pieces of mail per worker, compared to around 104,000 in 1926. And the trend is still upward, so even as the postal service has shrunk in the last few years, it has grown more efficient by this measure.

5) The ever-rising (but really quite stable) cost of postage

(U.S. News & World Report)

The USPS (through Congress) keeps ramping up the cost of postage, and with each hike, there is some degree of backlash. But when you adjust it for inflation, the cost of postage has been relatively stable since the 1980s and is in fact cheap today compared to the mid-1970s. The above chart from 2013 shows how much today's 49-cent stamp (then the "proposed" rate) would cost in comparison to the past. While it continued the upswing in the cost to send a first-class letter, it really didn't raise prices out of the ordinary.

6) Revenues vs. expenses

Starting in 1971, the USPS stopped receiving taxpayer dollars and became an independent agency of the US government. And in the last decade or so, the USPS's finances have gone from the black to the red. In 2012, the postal service lost a record $16 billion.

The internet certainly helped kill postal revenues, but the question of whether the USPS should have to undertake the costly step of prefunding retirement benefits is very controversial (see chart 8 for more). Congress in 2006 passed a law mandating that the USPS prefund pensions and health benefits for its retirees. The postal service and many of its supporters argue that it's silly to require the USPS to do this — no other government agency is required to do so, nor is any business. But proponents say it's necessary to keep taxpayers from eventually having to bail out the postal service.
What all of this really highlights is the odd no-man's-land that the USPS occupies, somewhere between being a business and a government entity. Congress has made it "independent" but still maintains heavy control over it. For example, Congress has nixed USPS plans to cut costs by cutting Saturday delivery. But then as the USPS cuts costs other ways and shrinks, it reduces service to many Americans, like those in rural areas. That raises the question of what sort of a postal service Americans have a right to.

7) Packages are helping the USPS stay afloat

The postal service isn't hurting on all fronts; in fact, its package business has been one bright spot for the agency. According to data from the USPS's 2013 annual report, package revenue grew by around 8 percent from 2012 to 2013. Partnerships with Amazon, FedEx, and UPS all are helping the USPS keep its parcel business thriving.

But it will take a lot of Amazon and eBay purchases to solve the postal service's fiscal problems. As the Wall Street Journal's Laura Stevens reported earlier this year, the postal service was designed for letters, not packages. First-class mail is simply more profitable than packages; currently, it takes around $3 in package revenue to make up for $1 in lost first-class letter revenue.

8) Prefunding retirements

(Government Accountability Office)

The US Postal Service has long railed against the requirement that it prefund employees' pensions and health benefits. This chart shows exactly how big those liabilities are (i.e., huge). As of 2013, the postal service owed nearly 1.5 times its annual revenues in retiree benefit funding.

9) Postal banking

(USPS Inspector General)

One plan the USPS has to boost its income is postal banking. In a proposal released earlier this year, the USPS inspector general pointed out that around one-quarter of all Americans are unbanked or underbanked — that is, they either have little or no access to financial tools like bank accounts or loans. That's a huge potential customer base, and the plan could benefit both the post office and poor Americans who rely on expensive payday loans. The above chart is an example from the proposal of what loans from a post office would look like — i.e., much less predatory than those from a payday lender.

U.S. Mail Delivers Amazon Groceries in San Francisco

 

http://online.wsj.com/articles/u-s-mail-to-deliver-amazon-groceries-in-san-francisco-1409854499

U.S. Mail Delivers Amazon Groceries in San Francisco

USPS Is Aggressively Chasing Bigger Piece of E-Commerce Pie

An Amazon Fresh delivery truck in downtown Los Angeles. Amazon also is using the U.S. Postal Service for a grocery-delivery experiment in San Francisco. REUTERS

Amazon.com Inc. and the U.S. Postal Service, already partners in Sunday deliveries, have launched a trial to shuttle insulated containers of meat, dairy, produce and other groceries to San Francisco customers' doorsteps. The test could presage a broader national rollout, giving Amazon's grocery drop-off service a much wider reach.

Through its AmazonFresh unit, the e-commerce giant today delivers groceries in its hometown Seattle, as well as Los Angeles and San Francisco. It is expected to introduce Fresh to additional markets in the coming months: Amazon lists job openings for produce-handlers in Avenel, N.J., about 25 miles outside Manhattan.

If successful, the two-month test could provide a boost to the Postal Service, which has aggressively chased a bigger piece of the e-commerce pie as the Internet chips away at other parts of its business. Its package business is up 20% over the past five years to 3.7 billion packages.

The Postal Service said it is testing AmazonFresh deliveries "to determine if delivering groceries to residential and business addresses would be feasible from an operations standpoint and could be financially beneficial for the organization."

A spokeswoman said the USPS is making the drop-offs between 3 a.m. and 7 a.m.; few of its trucks are in use at those hours. Because Amazon uses insulated tote bags for perishable groceries, the agency can make deliveries without the benefit of refrigerated trucks.

An Amazon spokeswoman said, "We are always looking for new and innovative ways to deliver packages to customers."

AmazonFresh offers more than 500,000 items, from groceries to books, videogames and paper towels, to be delivered at scheduled times or during three-hour blocks. Deliveries usually cost between $7.99 and $9.99, but are free for orders of $100 or more. A $299-per-year membership lowers the free-delivery threshold to $35 and includes unlimited shipping of Amazon.com goods.

Amazon has been leaning on the Postal Service for more of its regular deliveries, dropping off packages at local post offices for letter carriers to deliver to the door. The USPS also has an exclusive contract with Amazon for Sunday shipping in about two dozen U.S. cities, a service expected to expand to new markets in the coming months.

The 60-day grocery-delivery test started in early August, according to the Postal Service, and is limited to the San Francisco area.

In an interview in April, Postmaster General Patrick R. Donahoe said the agency would like a piece of the grocery business.

"We work with Amazon. They're an excellent, excellent customer and an excellent partner. We'd like to deliver their groceries," Mr. Donahoe said. "As the Postal Service, we visit every house, every day. Why not?"

 

The Post Office Lost $2 Billion In Just 3 Months

http://www.huffingtonpost.com/2014/08/11/post-office-losses-usps-losing-money_n_5669173.html

The U.S. Postal Service continued to bleed money during its second quarter, despite an increase in package revenues and an emergency price hike that took effect in January.

The agency said on Monday that it lost $2 billion from April to June, compared with a net loss of $740 million in the same period last year, and a $1.9 billion loss in its first quarter.

An increase in its shipping and package business helped the agency see a 2 percent rise from last year in its total operating revenues to $16.5 billion.

USPS has focused on its shipping and package business and expanded to Sunday package delivery as more people shop online and need a service to deliver their purchases. Shipping and package revenue jumped 6.6 percent, compared with the same period last year.

The volume of its most profitable product, first-class mail, fell 1.4 percent as more people communicate electronically, but the temporary rate increase helped offset the losses by bringing a 3.2 percent rise in revenues for that product. The rate increase is a temporary measure to mitigate the effects of the recession.

The jump in losses was largely due to a $1.5 billion increase in operating expenses as a result of workers compensation payments, the agency said.

USPS blames much of its financial troubles on a 2006 mandate to stow away billions of dollars for its future retirees' healthcare. The Postal Service already defaulted on three of its payments into the fund and does not expect to make the next $5.7 billion installment due September 30.

Because of continued losses, the agency also said, it has not been able to update its fleet.

"To continue to provide world-class service and remain competitive, we must invest up to $10 billion to replace our aging vehicle fleet, purchase additional package-sorting equipment, and make necessary upgrades to our infrastructure," said USPS Chief Financial Officer and Executive Vice President Joseph Corbett.

USPS and postal unions have so far failed to coax U.S. lawmakers to allow it to modify its business, including eliminating or modifying the future retirees' health fund.

The agency also wants Congress to authorize it to limit door-to-door delivery and to cut Saturday mail delivery, but those plans have been blocked by some unions and lawmakers who say it would hurt their communities.

Despite the red ink, the latest announcement showed an improvement from 2012 when USPS lost $15.9 billion that year.

Many in the industry point to these improvements as a sign that the agency does not need to make the drastic service cuts it has sought.

"Given the positive mail trends, it would be irresponsible to degrade services to Americans and their businesses, which would drive away mail - and revenue - and stop the postal turnaround in its tracks," Fredric Rolando, president of the National Association of Letter Carriers, said in a statement.

For FedEx and UPS, a Cheaper Route: the Post Office

http://online.wsj.com/articles/u-s-mail-does-the-trick-for-fedex-ups-1407182247

Agency Stretches to Handle Business From Express Couriers; Is the Price Right?
           

 

FedEx and United Parcel Service increasingly are moving their own packages through the U.S. Postal Service, putting pressure on the quasigovernmental agency and raising questions about whether the USPS is charging enough for the service.

 

For FedEx alone, the post office delivers an average of 2.2 million packages a day, or about 30% of the express-mail company's total U.S. ground segment.

 

UPS won't specify how much of its shipments go through the post office, but a regulatory filing indicates those types of lightweight shipments accounted for 40%—or about 37 million packages—of its total increase in ground shipments in 2012.

 

The post office is lapping up the extra package-delivery business from its private-sector rivals because it badly needs growth. In the past decade, it has lost more than 30% of its most profitable product—first-class mail—to the Internet.

 

"We've been focusing a lot of efforts on package growth, because that's the biggest opportunity for us," said Postmaster General Patrick R. Donahoe.

                                         

But the flood of these packages has begun to tax the system, and it has raised questions about whether the USPS is charging enough for its service. Even as UPS makes use of the USPS, a UPS executive on the company's earnings conference call last month questioned whether the Postal Service is unfairly cross-subsidizing certain products to offer lower prices.

 

Both UPS and FedEx rely on the postal office for the back-end of their cheaper two- to seven-day delivery options, Smartpost for FedEx and Surepost for UPS. Amazon also uses the USPS and enlisted it for Sunday packages to the Postal Service, analysts say. FedEx Smartpost volume dropped 8% in the quarter ended in May, FedEx reported.

 

Neither the Postal Service nor these big customers will reveal contract terms. "There should be more transparency" to make sure the agency is properly compensated, says Mark Jamison, a retired Postmaster from North Carolina, a frequent critic.

 

Mr. Donahoe says the criticism is unwarranted. "We make money on it. We wouldn't do it if we didn't make money on it," Mr. Donahoe said.

 

Postal carriers are already delivering to every mailbox, so transporting the presorted packages doesn't add significantly to costs, he said.

 

Rates have increased 27% from an average of $1.35 in revenue per package in 2012, according to postal filings.

 

First-class mail still accounts for nearly half of the USPS's revenue, while standard mail, such as advertising and circulars, account for about 25%. Packages—including those from FedEx and UPS—account for about 20% of the post office's revenue but are the fastest-growing, averaging 7% annual revenue growth the past four years.

 

The Postal Service is aiming to more than double its package-delivery business within a few years, Mr. Donahoe said.

 

The post office, established in 1775 to enable secure communications during the Revolutionary War, was designed for letters, not packages, and it is aging. About 140,000 of its 200,000 mail vehicles are more than 20 years old. The service also isn't nearly as automated as FedEx and UPS.

 

At FedEx and UPS, packages typically are automatically scanned on belts that deposit them directly to designated delivery vans. At local post offices, by contrast, mail carriers often sort packages manually and carry them to their trucks. Shelves to stack packages have been squeezed into tiny delivery trucks. The number of career postal employees has declined nearly 30% over the past seven years, and some mail carriers tend their routes twice a day, once with letters and once with packages.

 

To accommodate the growth, Mr. Donahoe plans to invest $10 billion over the next four years for improvements, including buying new vehicles, retrofitting old ones and upgrading package-sorting equipment.

 

It is unclear how the post office will finance growth, as it is chronically short on funds. Because the Postal Service has enough cash on hand for only about two weeks of operations, Mr. Donahoe is counting on Congress to pass a proposed bill that would give the Postal Service more financial flexibility, with options like cutting Saturday letter delivery. The Postal Service reached its $15 billion credit limit with the Treasury Department in 2012.

 

Under law, the USPS must pay its own way. It generated $67.3 billion in revenue in 2013, $7.5 billion of which came from selling stamps. It doesn't receive an annual taxpayer subsidy, but is reimbursed by Congress for some services such as delivering mail to the blind and overseas voters.

 

The USPS has generated about $1 billion in operating profit so far this year, but that is before its approximate $5.5 billion required annual contribution for retiree benefits.

 

There is little margin for error. If it misjudges its capacity or financial strength, it could end up with too many packages to deliver, compromising mail service. "Without significant structural changes, we will…continue on a path that will lead to insolvency and a government bailout," the postal service warned this summer.

Put your money where your mail is

http://www.economist.com/news/finance-and-economics/21601026-americas-postal-service-ponders-foray-financial-services-put-your-money

America’s postal service ponders a foray into financial services

Apr 19th 2014            

WITH a workforce of just over 491,000 in 2013, the United States Postal Service (USPS) is second only to Walmart among civilian employers in America. But it still employed more than 200,000 fewer people last year than it did just nine years earlier—when it handled nearly 500m more pieces of mail and had almost 2,000 more retail offices. The rise of e-mail has left America’s massive postal service with far less to do, and it has been scrambling to find ways to raise revenue.

Earlier this year its inspector-general released a white paper suggesting that post offices should begin offering financial services, such as cheque-cashing, small loans, bill payments, international money transfers and prepaid cards to which salaries or benefits could be transferred. The reasoning is simple: a lot of Americans have scant access to banks and a lot of post offices have too little to do.

More than one-quarter of American households are unbanked or underbanked, meaning they either lack a current or savings account, or they have one but still use alternatives to banks such as cheque-cashers and payday lenders. That is an expensive habit: the average underbanked household has an annual income of only $25,500 or so, yet spends around 9.5% of that on fees and interest charged by these banking substitutes.

High-street banks find it hard to make money serving poor customers, since they tend to have little money on deposit that the banks can lend out. Penalties such as overdraft fees are not always enough to compensate. Since 2008, 93% of bank-branch closings have come in areas where median household income is below the national average.

These are the distressed customers to whose rescue the USPS hopes to ride. Some 59% of its post offices are in places with either a single bank or none at all. In rural hamlets they are often one of very few commercial establishments; even in the postal service’s diminished state, there are still more than seven post offices for every Walmart in America. Post offices already sell money orders and provide electronic remittances to nine Latin American countries; from 1911 to 1967 the USPS also held personal deposits. Providing small, brief loans at lower interest rates than payday lenders (not a hard thing to do, since annual rates on payday loans can exceed 800%) could save low-income consumers hundreds of millions or even billions of dollars in interest and fees. The post office would compete not with banks, but with their more expensive stand-ins.

Some, notably the head of the committee of the House of Representatives that oversees the USPS, are unconvinced. They see the postal services’ expansion into financial services as government overreach, and a delay of the necessary “right-sizing” of a massive agency that does far less than it used to. Jennifer Tescher, who heads a charity focused on the underbanked called the Centre for Financial Services Innovation, notes that the USPS “has zero capacity, understanding or capability in this arena”. “The only asset they bring to the table”, she believes, “is distribution.” Even that is of limited value outside rural areas: Ms Tescher notes that just because a spot lacks bank branches does not mean it has no cheque-cashers and corner shops selling prepaid cards—many with longer and more convenient opening hours than the post office.

Although turning the USPS into a part-time financial institution may seem outlandish in America, roughly 1 billion people in 50 countries rely on their postal systems for financial services, according to the Universal Postal Union, the United Nations agency that helps the post arrive on time. The business models vary widely. In some countries post offices act as a payment centre, allowing people to receive remittances, pay bills and top up or tap money stored on their mobile phones. Some operate full-service banks: Japan Post, for instance, is one of the world’s biggest. In other countries, such as Brazil, commercial banks form partnerships with post offices; in Malawi private banks can rent space from post offices.

A World Bank study found last year that postal banks are likelier than conventional ones to provide accounts to those outside the financial mainstream. The bigger the postal network, the greater the ability to reach such people. That may not convince those who would like to see the USPS shrink, but for those who want to preserve it, it could help to justify its scale.

Ben Franklin Would Love to Send Letters From Staples

http://www.businessweek.com/articles/2014-03-17/ben-franklin-would-love-to-send-letters-from-staples

Isn’t it ironic that the U.S. Postal Service selected a retail partner whose business is almost as troubled as its own? That was the key point in a clever piece by New Republic’s Alec MacGillis condemning the plan to open outlets in Staples (SPLS) stores. USPS lost $5 billion last year, which is why it is eager to boost its revenues by opening retail outlets in Staples. The retail chain isn’t doing much better. Earlier this month, following dismal sales, Staples announced that it was closing 225 stores.

Even if Staples weren’t in trouble, it’s unlikely MacGillis would support the USPS in this case. He argues that opening post offices in stores is likely to lead to long lines in existing postal facilities. ”The postal service management [has] decided they’d rather have you head off in search of a Staples, somewhere out there in the big-box jungle,” he writes. “That is, if there’s even a Staples left standing in your neck of the woods. Somehow, I doubt this is what Ben Franklin had in mind.”

Franklin, the nation’s first postmaster general, might not like the idea of poor service, but he would have no qualms about opening post offices in stores. In Franklin’s day, there were no free-standing post offices. Almost all of them were all located in taverns and coffee houses. In that sense, the latest USPS plan is more keeping with his original vision than its critics might care to admit.

Indeed, opponents of the USPS reform efforts often evoke Franklin’s name. They suggest that the USPS shouldn’t alter or reduce its operations because it was founded by one of the signers of the Declaration of Independence, and the current system is somehow what he had in mind from the start.

That’s not true. It was cheap to send newspapers through the mail in the early days of the American post office, yet letters were so expensive that most Americans rarely bothered. That didn’t change until 1845, when Congress threw out Franklin’s old pricing system and introduced cheap uniform letter pages. There was no home delivery back then—unless you paid extra for it.

There’s a larger point to be made here. Throughout its 238-year history, the American postal service has changed a lot. Now it needs to transform itself yet again, so it can survive in the digital age. The Staples plan may have drawbacks, but it’s similar to what forward-thinking postal services in such countries as Sweden and Germany have done to reduce costs as mail volume falls because of the Internet.

In fairness, MacGillis acknowledges that the USPS needs to change with the times. He applauds it for striking a deal last October with Amazon (AMZN) to delivery the Web retailer’s packages on Sunday. He might want to reconsider the Staples plan, especially since he’s so eager to drop Ben Franklin’s name.

Why Republicans Love Obama's Post Office Plan

http://www.businessweek.com/articles/2014-04-09/why-republicans-love-obamas-post-office-plan

Representatives from the Obama administration can usually expect a chilly reception, at best, when they testify before U.S. Representative Darrell Issa (R-Calif.) and his fellow Republicans on the House oversight committee. But Brian Deese, deputy director of the White House Office of Management and Budget, got just the opposite on Tuesday.

Deese appeared before the committee to discuss the president’s postal reform proposals in his 2015 budget. Rather than attack, Issa and company emphasized how the White House plan harmonizes with their own effort to fix the troubled USPS, which reported a $5 billion loss last year.

The House Republicans are especially agreeable when it comes to ending Saturday letter delivery. “The administration’s proposal includes giving [the Postal Service] the authority to move to five-day delivery,” Deese testified. “It’s our belief that this needs to be part of a comprehensive and balanced plan.”

“Right,” replied Issa. “We concur with that. Would you say the president’s proposal in the budget would be considered comprehensive?”

“Yes, sir,” Deese said. “We believe that the proposal we put forward is comprehensive and balanced.”

The friendly banter continued when the topic turned to whether the USPS should continue to prefund its future retiree health-care benefits. Since 2011 the agency has defaulted on its annual $5 billion prepayment, which is one of the reasons why its overall numbers have been so terrible.

Some Democrats and their allies in postal union circles have made the dubious argument that the prefunding requirement is the primary cause of USPS’s fiscal troubles. If eliminated, they contend, the agency’s fiscal woes would largely be over. That’s not how the White House or the Republican oversight committee members see it. They fear that the USPS, which has lost more than 25 percent of its volume since 2008, might eventually need a taxpayer-funded bailout to make good on its long-term obligations.

Essentially the White House and the Republicans would both like to stretch the prefunding payments out over a much longer period so the payments are more affordable. “I like to tell postal workers who complain about this, ‘Don’t you want to be sure there’s money there for your health coverage?’” said Republican Representative Blake Farenthold of Texas. Deese agreed: “To the degree that prefunding is financially viable, it is a wise financial decision.”

This left Democrats on the committee in the awkward position of attacking a plan put forward by the leader of their own party. “I believe the mail should be delivered on time every day, including Saturday,” said Representative Carolyn Maloney, a Democrat from New York. Representative Gerry Connolly (D-Va.) pointed out that he has introduced a bill that has 210 co-sponsors, including some Republicans, to preserve Saturday delivery. “Good luck in trying to persuade Democrats into five-day,” he said.

Perhaps. But the White House and House Republican leaders such as Issa are much closer on postal reform than they were last year when Connolly introduced his bill. The Virginia Democrat might want to check with his allies and make sure they’re still on board.