Recently, the United States Postal Services earlier this month announced a net loss of $3.5 billion and stated it will likely be in financial shortfall going into 2011. Next year, the organization will be required to fund $5.5 billion in retiree health benefits. Although the organization still delivers half of the world’s various postal packages and mail, its reported revenue losses in 14 of the last 16 fiscal quarters. In fact, they have already taken steps to try to achieve savings reductions internally, such as removing Saturday delivery service which is almost certainly going to happen. As a result, the USPS is also looking to raise postage prices by seeking congressional approval from the Postal Regulatory Commission. As much as it sounds like a necessary move for the USPS, I feel it’s also a very dangerous move to raise postal rates. It may discourage many customers in the industry and further worsen the financial situation than they’ve already facing, especially if they raise postage mailing rates for small and medium businesses.
What concerns me most is that with an already rapid decrease in mail volume mainly from the emergence of email, the internet, and increased competition from Federal Express and United Parcel Service, such a move can potentially make things more difficult for small and medium businesses. These groups are the most frequent users of the USPS and their large commercial mailings. They are clients who enjoy mailing at discount rates because of their large volumes, but are also the essential main engine of much of the USPS revenue year after year. Potentially, if you increase the postage costs of them to reach their customers, some of these businesses may think about other ways of reaching them (such as email or text messages) and bypassing mailing services altogether. This includes clients also considering going with the competition that may still have Saturday delivery service in the future when USPS will not.
Furthermore, this can also increase the postage rates of their competitors in the private sector, leaving businesses with less incentive to utilize mailing services altogether. You may expect a reduction or consolidation of mail, meaning less revenue for the United States Postal Service. Although it is understood that every business needs to be operating at a profitable level, USPS should have done a better job becoming more efficient and adapting their expenses with the decreases in mail volume that’s occurred in the last decade but going forward, it should be very careful in how it operates. As a result, it’s probably in our best interest for the USPS to avoid raising postal rates, especially for small and medium sized businesses. Otherwise, the volumes in packages and mail that they handle today maybe mail that may never come back again tomorrow.