Thursday, September 26, 2013

Why the Exigent Postal Rate Increase Will Backfire

Let’s be honest: Given the U.S. Postal Service’s dire financial condition, the 4.3% emergency rate increases it announced yesterday are hardly exorbitant. That won’t prevent the move from being a disaster for the nation’s mail system.

I have little doubt that some Congressman will blast the USPS Board of Governors for putting forth relatively small “exigent” (greater-than-inflation) price increases. But the micro-managers on Capitol Hill, who should be focused on getting their own house in order, need to understand why the governors aren’t pushing for more.

I think the Board of Governors is trying to make the best of a bad situation, attempting to satisfy the political pressure for higher prices without scaring away customers. I suspect they understand the dangers of any exigent increase in the context of recent Congressional inaction and downright buffoonery on postal issues.

Being part of an industry (magazine publishing) that opposes any exigent increases, I’m not supposed to say this but I will: Mail-dependent companies could probably stomach a one-time extra price increase of less than 5% if – and this is a big “if” – it were part of a larger move to put the Postal Service onto a sustainable path.

We wouldn’t like it, and we might grumble loudly. But most of us would happily pay a few more percentage points in return for ensuring the long-term health of the postal system. And we would stop putting so much energy into figuring out how to reduce our mail volumes and once again include creative use of the mail in our long-term marketing plans.

That, however, is not what happened yesterday. What we got instead was an exasperated Postal Service whose attempts to right the ship have been scuttled at almost every turn by a do-nothing Congress. Accompanying the announcement are:

  • No refund of the billions of dollars the Postal Service overpaid into the federal pension system because of funky accounting.
  • No payback of the billions of dollars in interest-free loans USPS has given the federal government under the euphemistic name of prepaid retiree health benefits.
  • No real progress on consolidating the Postal Service’s bloated network of post offices.
  • A recent reversal of progress on correcting the shamefully slow process of getting postal retirees their full annuity payments, which makes employees afraid to retire and stymies the Postal Service’s move to a smaller, more flexible workforce. (The much-maligned federal bureaucracy was making real headway until – you guessed it – Congress derailed the train of progress by failing to pass a budget, as explained in Budget Cuts Are Delaying USPS and Federal Retiree Payments.
  • No action on allowing the Postal Service to start potentially lucrative ventures – even ones that wouldn’t really compete with private enterprise, such as delivering wine and beer.

All of that inaction makes yesterday’s announcement scary for the business mailers that provide the bulk of the Postal Service’s revenue. We can see what’s coming: Congress members will continue nagging the Postal Service to be more businesslike while forcing it to do something very un-businesslike – raising prices in the face of increased competition and declining demand.

What we mailers see is not a one-time price hike but rather the first of many “emergency” increases that will increasingly thrust USPS into a death spiral. Congress will keep blocking meaningful action on the Postal Service. But USPS customers (and employees) will be the ones who are punished.

As the mythical pirate captain told his crew, “The beatings will continue until morale improves.”

Except that, starting yesterday, mail-dependent companies began redoubling their efforts to get off the ship.

Don’t be surprised if more alternative-delivery ventures sprout up to deliver coupons, magazines, product samples, and even catalogs. Or if publications start providing real incentives to switch their subscribers to digital editions.

Don’t be surprised to see more “Go Green, Go Paperless” campaigns as banks and utilities desperately try to slash their mail volumes. (The “Go Green” part of the slogan is, at best, unsubstantiated, unless it refers to the bank’s cash flow and not to the environment.) Getting a large portion of its customers to switch to paper-less billing will look like a growing source of competitive advantage for companies that send a lot of bills.

Even without knowing whether yesterday’s proposal will stand up to litigation, business mailers all over the country are already asking the same questions: How can we reduce our mail volumes enough next year to counteract the price increase? And, longer term, how can we get out of the mail altogether before these price increases get totally out of hand?

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Lisa Bowes said...

"Being part of an industry (magazine publishing) that opposes any exigent increases, I’m not supposed to say this but I will: Mail-dependent companies could probably stomach a one-time extra price increase of less than 5% if – and this is a big “if” – it were part of a larger move to put the Postal Service onto a sustainable path."

This section quoted above is what resonated with me most of all, and why I think this is a brave and most excellent post. If everyone - the Mailing Industry, USPS, Labor Unions, and most of all, our dysfunctional Congress - could attack the USPS challenges with a spirit of compromise vs special interest, success would be guaranteed. Exigency is another giant leap - in the wrong direction.

Marc Zazeela said...

The way Congress treats the USPS is amazing. What is really difficult to understand is why the USPS has not made its case more public?

I have friends who still believe the Post Office a taxpayer funded, government agency. They are adamantly opposed to any Congressional bailout.

While both points could not be more incorrect, the majority of Americans have the same beliefs and therefore exert no pressure on Congress t actually fix this mess.

Anonymous said...

The USPS in it's present form, is a sinking ship.

Smart business people, not partisan, political hacks understand that you don't throw good money after bad.

Spirit of compromise = kicking the can down the road and putting additional debt on next generations.

Wake up and take off the rose colored glasses as well.

All Your TSP Belong To Us ! said...

Charge whatever you want, on whatever you want.

Doesn't matter now, and won't matter in the future.

Every day, fewer and fewer people and businesses are using our products/services.

Raising prices on a product that is getting used less and less won't accomplish anything.

I give this outfit, five, ten years max. before it's gone.

Unknown said...

Article said: No real progress on consolidating the Postal Service’s bloated network of post offices.

Wrong! USPS has consolidated its network and post offices. The biggest complaint from the customer, "Where's my Post Office", its Gone!

The biggest complaint, is from the postal employee. Consolidation and the lack of employees (retirements) has caused delays in delivery and a big jump in over-time

Anonymous said...

lOVE THIS ONE: “The beatings will continue until morale improves.”

Frank said...

What about the $14 to $18 billion a year in undercharges?

During a House hearing earlier this year, this was the amount quoted by the post master general. The Postal Regulatory Commission sued the post office for undercharging and won. The post office is now appealing the decision.
Why would postal management undercharge by billions when the service is in trouble? Has management been bought off by big mailers, or are they getting pressure from congress?

Hundreds of offices are being closed all across the country and yet the union leadership is not questioning congress. Why?

Unknown said...

Postal management under charges because it is postal management. It is a very inept, incompetant group of people running the postal service. Almost as much as Congress.

Unknown said...

Because it is postal management. They are a very poorly trained group that is supposed to be leading the postal service. Very incompetent. Almost as much as Congress.