The Post Office Is Doomed. Some Say Good Riddance

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Good riddance to the post officeIf the U.S. Postal Service fell into bankruptcy (perhaps in a forest?), would anybody care? Not according to Gary MacDougal, who served on the board of directors at UPS (UPS) for 34 years.

In a scathing attack on America's Post Office last week, the former McKinsey & Co. partner argued that "the rapid growth of email, online bill paying," and private parcel delivery firms like UPS and FedEx (FDX) has made USPS obsolete. Statistics suggest he's right.

Where's the Mail?

Mail volumes at the post office have dropped 50% in the past decade, and it's getting worse. Post Office estimates suggest a further 37% drop between now and 2021.

According to the Associated Press, U.S. households received a personal, handwritten letter from a friend every two weeks on average in 1987. By last year, that had dropped to once every seven weeks. Even run-of-the-mill business correspondence has taken a hit. AP reports that for the first time ever, the percentage of bills paid by mail dropped below 50% last year. Meanwhile, UPS and FedEx just keep stealing more and more of the parcel post market, with revenues up 8% and 11%, respectively, last quarter.

So ... no personal letters. No bills from the electric company. No checks mailed to the electric company. And no packages. What's left?

"Junk the Junk Mail Office"

In two words: junk mail. Those deliveries are up 3% this year and now account for 48% of all mail delivered in the U.S. And though these mailings are often bigger and heavier than standard first-class mailings, the post office charges less than half the cost of a first-class postage stamp for each catalog it delivers.

MacDougal's column, of the title stated above, argues that about the only area of USPS' business showing any growth at all today is advertising. Yet he notes that because USPS charges so little for the delivery of junk, the rising proportion of this category of mail is contributing to the postal service's annual lament over "billions of dollars in losses."

Seeing the data, MacDougal asks the logical question: If USPS has morphed into a photo negative of Waste Management (WM) -- a service whose business is delivering junk to people's homes, rather than taking it away -- then perhaps it's outlived its usefulness. It's time to seriously consider an outplacement plan for the postal service's 559,000 employees, to sell USPS's fleet of 200,000 mail-truck clunkers for cash, and auction off the service's acres and acres of "prime real estate in cities and towns across America" as well.

In short, it's time to "junk the junk mail office" and allow UPS, FedEx, and "a host of local delivery companies now serving most major cities" to begin filling the gap and coming up with innovative, cost-effective alternatives to our outdated postal system.

One Man's Junk Mail Is Another Man's Treasure

Sounds logical to me, but over at the Post Office, they've got a different take on things. No sooner did MacDougal's diatribe hit the news wires than USPS floated its own plan to save itself -- by doubling down on the junk-mail business.

According to Postmaster General Patrick Donahoe, junk mail isn't really "junk" at all. It's "a lucrative avenue for anyone who wants to reach customers." (This despite Direct Marketing Association findings that only about 1.4% of households receiving junk mail actually respond to the mailers by making a purchase.)

Undeterred by bulk mail rates that already undercut first-class stamp prices by half, Donahoe has floated a plan to offer even steeper discounts to advertising mailings that bear "a special code that could be read by a smartphone." With new rules facilitating bulk mailings and rates now as low as $0.14 a piece, the USPS is encouraging small businesses to up their mail volume.

Spam is Spam

For years, critics have argued that the USPS's problem is that it simply doesn't know how to run a business. But from where I sit, it seems Donahoe has at least learned one famous business joke: "Sure, we lose money on every product we sell -- but we make it up on volume!"

Unfortunately, he doesn't get that this is a joke. He thinks it's a business strategy.

And that's just the problem. Everyone knows junk mail is junk. That's how it got its name. Yet no matter how many customers tell him they hate junk mail, that it's a chore to sort through, shred, pitch, and dispose of the stuff, Donohoe stubbornly insists that we don't know what we're talking about: "People may complain," but we actually like our "coupons and other advertising mail."

No, Mr. Postmaster General. We really don't.

Motley Fool contributor Rich Smith does not own shares of any companies named above. The Motley Fool owns shares of United Parcel Service, Waste Management, and FedEx. Motley Fool newsletter services have recommended buying shares of FedEx and Waste Management; and creating a write covered strangle position in Waste Management.


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54 Comments

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acdinc1

Mr. PostMaster General,

The first thing our family does when we retrieve the mail is sort out all the junk mail. If our family wants something to purchase, we are not going to use the junk mail we recieve to order it, we will go on-line and search for the best price. This generation communicates via electronic format via the internet, whether it be e-mail, facebook, etc. I believe UPS is right, shut it down and save the taxpayers a lot of money.

For those who think the US mail is doing us a service by providing cheap mailing you forget one thing, THEIR IN THE RED EVERY FREAKIN YEAR!!!!!!!

April 23 2012 at 10:51 AM Report abuse rate up rate down Reply
Edward

I just saw the guy that wrote that we already have private mail called fedx and ups .go ahead ship a card by that service it will cost $10 that way not 45 cents . it just shows how dum some people are .

April 20 2012 at 8:37 PM Report abuse rate up rate down Reply
Edward

those of you who say good riddance are not thinking . not only do you loose the only system that can deliver to every house in the us . you also put out of business every non proffit how many more hundreds of thousands do you put out of work . you might say they can use the internet . but like you unless you know who is sending it you delete it . there is know other business in this country that can do what theusps can do at the price we do it . the postoffice charges nonproffit org very little , for as little as 1 cent to send a letter . you might say to priv. company could better . but then are they going to put the nonproffit co out of business . do you think they would send a letter for one cent ., i dont think so

April 20 2012 at 8:30 PM Report abuse rate up rate down Reply
smithisajerk

We also deliver medicine. We make sure your house isn't on fire. And deliver coupons to people WHO actually use them the day they get them. Can't get an app for that.

October 18 2011 at 9:35 PM Report abuse rate up rate down Reply
Bruce Feher

All I get from the USPS is junk mail and bills...

October 16 2011 at 6:07 PM Report abuse rate up rate down Reply
mike

As far as you can get from obsolete! This is part of what's happening now. Selling out American institutions and selling us out. It would be naive to believe there are not corporate forces at work here. Why have they targeted the post office? Most everything bought and sold on the Internet has to be shipped The Internet shipping business is big and is going to get exponentially bigger and become exponentially more lucrative world wide. If they
privatize the USPS, they will have eliminated THE MOST LEVERAGED AND ADVANTAGED PLAYER IN THE SHIPPING BUSINESS. Tax exempt, non profit and with the largest infrastructure on the planet. Fed Ex, UPS and DHL, no one can compete with the United States Postal Service. There are trillions of dollars at stake. The USPS
can generate massive federal revenues and still keep the cost of a stamp down much better than anyone. All those revenues will go into the pockets of profiteers instead of our treasury. Once it’s done , it can’t be undone. The Postal Service has trillions in real estate and infrastructure assets which are owned free and clear without tax liabilities. Once they’re sold, we will never be able to afford to buy them back. Gone forever. There is
more at stake than tons of money. American freedom and liberty. Ben Franklin the first Postmaster General couldn't see the Internet coming but he and others were smart enough to realize that we have the right to a free flow of correspondence and conveyance of materials without profiteers and possibly foreign entities
having any control over it. Don’t let the USPS be turned into a utility bill and junk mail delivery service while the multinationals make a grab for the real estate and equipment that took the the American people more than 200 years to acquire . Please take a look at this article .http://redtape.msnbc.msn.com/_news/2011/10/07/8191425-twisted-government-accounting-behind-postal-service-woes

October 13 2011 at 10:57 PM Report abuse rate up rate down Reply
Vito

The usps is not doomed but we as a country cannot afford the luxury of 6 day a week delivery. Today is Thurday. Monday I received 4 catalogs, tuesday gas and electric bill and two catalogs, wednesday netflix, two catalogs and a doctor bill. Cant wait for today. Look usps would be fine with 3 delivery days a week. If you need it more often get po box. The post office will still be open 6 or more days week.

October 13 2011 at 7:09 AM Report abuse +1 rate up rate down Reply
jamesh

Tell the UPS guy EVERY DAY one of his brown trucks drops off over 200 pieces of parcel post to the Post Office I am a letter carrier at. Fed Ex, the same thing. WHY? Because they will not deliver the "final mile"
Now, if there was no USPS who would get those packages of MEDICINE delivered where they are needed??
Keep em coming boys. We can use the $$$ and don't mind serving the public as we have for hundreds of yrs.
Jimbo RT 53

October 12 2011 at 5:36 PM Report abuse +1 rate up rate down Reply
ATB3

We already have private mail- its called FedEx, UPS, and the other shipping company.

October 12 2011 at 4:15 PM Report abuse rate up rate down Reply
kooshmoose

I would love it for the USPS to raise the price of junk mail delivery (which would hopefully kill most junk mail and reduce the number of unsolicited catalogs) and I wouldn't mind 2-3 delivery days per week. I don't know about most people, but I don't even check the mailbox more than that already.

October 12 2011 at 1:35 PM Report abuse +1 rate up rate down Reply