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The United States Postal Service (USPS) handles cards, letters, and packages sent from sea to shining sea. The USPS delivered some 168 billion pieces of mail in fiscal 2011 in the US and its territories, and if that’s not enough, it claims to deliver more than 40% of the world’s mail. The independent government agency relies on postage and fees to fund operations. Though it has a monopoly on delivering the mail, the USPS faces competition for services such as package delivery. The US president appoints nine of the 11 members of the board who oversee the USPS. The presidential appointees select the postmaster general, and together they name the deputy postmaster general; the two also serve on the board.
Mailing Services accounts for about 86% of USPS revenue with Shipping Services making up the rest. In Mailing Services the major product group is First-Class Mail, which itself represents about 50% of the agency’s revenue. First-Class Mail is available for postcards, letters, advertisements, and flat merchandise that weighs less than 13 ounces.
The next largest category is Standard Mail, which contributes to 27% of the agency’s revenue. Available for items weighing less than 16 ounces, Standard Mail is generally used for direct advertisements delivered to multiple addresses. Periodicals account for 3% of revenue. The rest of the Mailing Services group is made up of Package Services, which accounts for 2% of the agency’s revenue, and Other Mailing Services, contributing 5%. Shipping Services, accounting for 14% of revenue, includes Express Mail, Priority Mail, Parcel Select, and Parcel Return Services.
The USPS manages a retail network of 31,000 post offices and more than 70,000 alternation locations and offers online access through its website.
Its overall revenue declined about 2% from 2010 to 2011, falling from $67.0 billion to $65.7 billion. Struggling with competition from email and other online services and a weak economy, Mailing Services was down 3% over the same period. First-Class Mail, also challenged by online media, fell about 6%. Standard Mail, however, was up about 3%, supported by a slight bump in the economy.
Periodicals decreased 3% as more readers turn to e-readers and electronic content. In contrast, e-commerce (as well as favorable pricing) helped Package Services enjoy an uptick of 4% in fiscal 2011 compared with 2010. Other Mailing Services fell about 11%. Shipping Services was also boosted by e-commerce, increasing 6% in fiscal 2011 versus 2010. Over the same period mail volume as a whole decreased about 2%.
The agency weathered a net loss of more than $5 billion in fiscal 2011, due to the overall decrease in mail volume and a staggering $70 billion in operating expenses. At the end of 2011, it was burdened with a debt load of $13 billion.
The agency has reduced spending by more than $9 billion by implementing several cost-cutting measures, such as reducing upper management positions by 16%. Also, a restructuring of operations that includes reducing the number of facilities, using more retail partners, kiosks, and online services, and more efficient delivery is expected to save $6 billion in total operating costs by fiscal year 2015. The agency’s new retail strategy includes partnering with such retailers as Office Depot, Wal-Mart, Costco, Staples, and Walgreen to offer postal services outside of the traditional post-office setting. The agency also closed more than 380 postal-managed sites in fiscal 2011.
One of the biggest challenges the agency is facing is the increase in Internet usage, which has led to lower volume of some types of mail. To keep pace, the USPS has worked to gain delivery business generated by online shopping and e-commerce. The agency has been offering more products and services and online, and it has upgraded its website to ease online mailing. In 2012 USPS added PayPal as a payment method for online shipping. While mail volume as a whole has been declining, package deliveries as a percentage of revenue have grown from about 13% in 2006 to 16% in 2011.
Perhaps the most dire challenge facing the USPS is a congressional mandate that the agency must pre-fund retiree health benefits with annual payments of between $5.6 billion and $11.1 billion between 2012 and 2016. In mid-2012 the USPS began defaulting on its payments, and it is asking for a major reform in the legislation that calls for this requirement. –