Priority Mail has been one of the most profitable products for the U.S. Postal Service, growing six times faster than first-class deliveries over the period from 1995 to 1999 and accounting for almost 8 percent of the Postal Service’s mail revenue. Because the Postal Service lost $480 million in the fiscal year ending September 30, 2000, it adopted the strategy of raising Priority mail rates by 16 percent to help offset this loss. Bear Creek Corporation planned to ship 15 to 20 percent fewer priority mail packages in response to the rate increase.
If this corporation’s response is typical for Priority Mail customers, will the Postal Service meet its goal of reducing its deficit with this policy?
In my mind, the issue regarding the financial condition of the United States Postal Service (USPS) is more than mathematic. It covers a wide spectrum of challenges. In each way one looks at or examines the challenges, it seems unlikely that its goal of reduction or elimination of its deficit will be met.
One particular reason is because of lower volume. Volume of mail has decreased significantly because of technological enhancement. Use of email as well as other technological initiatives such as Skype have transformed how communication between parties is received. Texting has become another way in which the need for physical mail has decreased over time. Political leaders have acknowledged this reality: "The volume simply is not there; e-commerce has taken its toll. We used to write letters to grandma and stuff like that, now we just don't do that anymore. You can't deliver what's not there." Mail is not necessarily embraced as the primary option as it once was perceived to be. This includes Priority Mail. While Priority Mail saw an increase, the entire volume of mail is in decline. The drop in volume impacts overall productivity. Since the glaring deficit is structural and one that impacts the entire organization, the increase in costs within one section such as increase in Priority Mail will not remedy the entire condition of financial freefall.
This larger issue is fleshed out in the reality of the USPS finances. The organization saw an $8.5 billion budget shortfall in 2010,and was losing money at a rate of about $3 billion per quarter in 2011. These numbers are staggering. The rise in Priority Mail rates will not be enough to solve the overall condition of USPS deficit.
In the end, the increase in rates of Priority Mail services will not be enough to remedy the USPS deficit. One has to go back to the fact that mail is not seen as a pressing communications medium. If "people don't write letters to grandma," it is reflective of a larger shift in consciousness. Letter writing and the need to communicate through physical mail is simply disappearing. Other means have supplanted it. The success in the Priority Mail sector is not going to be enough to compensate for the reality in which one cannot send or mail what is not there.