In June, FedEx (NYS: FDX) reported its most profitable quarter since June 2007. A few weeks later, UPS (NYS: UPS) boasted of a 25% year-over-year pop in profit. And you know what, folks? The news will only get better for them. Their biggest competitor in less-than-truckload shipping, YRC Worldwide (NAS: YRCW) , is on the ropes, losing money and alienating its owners. And their biggest competitor, period, isn't doing much better.

Last week, Postmaster General Patrick Donahoe announced a plan to close nearly 3,700 post offices across the nation. Beginning in January, branch closures will begin hitting towns in all 50 states of the Union, along with Washington, D.C.

The U.S. Postal Service (USPS) is losing about $8.5 billion per year. Studies show that by 2015, it will be losing $20 billion annually. Plans for biweekly stamp-price increases (I hyperbolize, but only a bit) and truncated mail-delivery weeks (axing Saturday delivery) won't close the gap. To break even, USPS will retrench -- become "smaller, leaner and more competitive" by closing offices with "so little foot traffic that workers average less than two hours of work per day and average sales are less than $50 a day." And even that may not be enough.

It's hard to overestimate the impact a post office closure has on a small American town -- but it's actually pretty easy to estimate how little this move will help USPS. According to Donahoe, annual savings from the closures will amount to no more than $200 million. So congratulations, Mr. Postmaster General. You've solved 1% of the problem.

Now for the other 99%
Granted, USPS's plan to close post offices imperils our access to junk mail, Bed Bath & Beyond 20% off coupons, and credit card preapprovals. Indeed, once eBay's (NAS: EBAY) PayPal (where revenue is growing 30% per year) and the banks' online billpay services have finished stomping out snail-mail-borne invoices, it's hard to see what purpose USPS will still serve.

Perversely, all this will boost business at FedEx and UPS. Unlike the post office, they focus on delivering packages that people actually want to receive. As USPS becomes increasingly customer-unfriendly, the quality gap between it and the services provided by "privatized mailmen" can only widen.

My guess: USPS is now 99% certain of eventually going out of business. And it's got only itself to blame.

Disagree? Feel free. If you think there's still a future for the post office, scroll down and tell me why.

At the time this article was published The Motley Fool owns shares of FedEx and United Parcel Service. Motley Fool newsletter services have recommended buying shares of Bed Bath & Beyond, eBay and FedEx.Fool contributor Rich Smith does not own (or short) shares of any company named above. Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.


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misterpep

Rich Smith....I'd like to buy you for what you're worth and sell you for what you think you're worth....how's that for good business ? The Post Office will never die. Motley Fool on the other hand......

April 22 2012 at 6:18 AM Report abuse rate up rate down Reply
jotom760

3 cent stamps were subsidized by the gov't for years. The PO also subsidized the airlines and the railroads by paying fees for which they got no service. Sat delivery should have been eliminated years ago. UPS and Fed Ex
will want to take over the profitable parts but not the unprofitable of which there are many. Book rate, library rate, etc. The PO is in trouble but u might blame some of the management as well as Congress!

April 22 2012 at 1:17 AM Report abuse rate up rate down Reply
Vicki

JURON123, WHERE DO YOU GET YOUR INFORMATION? WE GET PAID FOR THE HOURS WE WORK. RURAL CARRIERS HAVE A DIFFERENT CONTRACT BUT STILL END UP WORKING FOR WHAT THEY GET PAID. ALSO, WHERE HAVE YOU BEEN ALL THESE YEARS? TAXPAYERS HAVE PAID NOTHING TOWARD THE POSTAL SERVICE SINCE 1971...

April 21 2012 at 12:56 PM Report abuse rate up rate down Reply
juron123

Close it down. Allow private companies to deliver the mail. Tfhe average postal worker works less than 6 hours a day and gets paid for 8. their government jobs are protected so thet don't have to worry even if they do a poor job. Why pay for poor performance with tax payers money when private companies could do the job at no cost to the taxpayers and make a profit donig it.

August 18 2011 at 4:05 PM Report abuse -1 rate up rate down Reply
1 reply to juron123's comment
agentdw420

How stupid are you really? The taxpayers don't pay a penny towards the Postal Service.

April 20 2012 at 11:02 PM Report abuse +1 rate up rate down Reply