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Drama at the Postal Service: Is Ecommerce in Attendance?

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Lights, Camera...

In case y’all have been too busy working, you are missing the storm brewing in the land of the U.S. Postal Service.

Executive summary

  1. - The Postal Service is not a tax-supported government agency. Revenue from postage pays its expenses.
  2. - The Postal Service is hurting, big time, racking up billions in losses lately.
  3. - A key cause of this is the steep decline of First Class Letter Post (Paying your bills on line, are you? Hah, then this is your fault!)
  4. - To cut costs, the Postal Service plans to cut Saturday mail delivery
  5. - As one angle to cut the red ink, the Postal Service requested a rate increase, which the Postal Regulatory Commission (aka the PRC) denied this past September.
  6. - A few weeks after this denial, the Honorable Postmaster General John E. Potter announced his retirement, effective this December.
  7. - To give the Postal Service executive authority to make its own decisions about cuts and pricing requires an Act of Congress.
  8. - By law, even closing a Post Office cannot be done for economic reasons.
  9. - The PRC, which has oversight of several areas of the Postal Service, appears to be a partisan organization. (Who knew my electric bill was a party member? Philatologists are, perhaps, activists of some kind?)

The more I read, the more empathy I feel for the Honorable John E. Potter.

Reading through the material is surreal. The PRC seems to interpreted the law that the Postal Service cannot ask for rate increases due to long term shifts in the underlying business. (E.g. if a tornado hits tomorrow, wiping out 10 large postal distribution centers, incurring hundreds of millions of damage and extra cost, the Postal Service can ask the PRC to allow an “exceptional” rate increase. But if a ten-year shift in mailing patterns breaks the business model of the Postal Service, and mandates a rate hike, the PRC unanimously refuses, saying, in effect, “this problem is happening anyway and is not exceptional.”)

News item: The internet is not an exceptional event. Someone please please tell Google and Facebook.

So the Postal Service cannot raise rates (because the PRC doesn’t approve), and cannot cut many kinds of costs (because many kinds of cuts require an Act of Congress to approve).

Quite a catch, that Catch-22. Accountability without authority anyone? No CEO would put up with a fraction of what the Postmaster General does.

Is the Postal Service Important to CEO’s ?

I don’t know. So let’s focus on ecommerce. I spend my days with merchants, not in corner offices.

A large percentage of ecommerce business is delivered by the Postal Service. For example, in the eBay marketplace, %50-70 of all sales are delivered by the Postal Service. (My colleagues tell me similar numbers apply to the Amazon marketplace.)

In other words, tens of thousands of ecommerce businesses, many of them home based businesses, are dependent on the Postal Service.

And for the Postal Service to avoid bankruptcy during the next 12 months will require one or more acts of Congress. We just elected the 112th Congress, and I don’t remember this topic coming up. Given the backlog in DC, I would be surprised if the lame duck 111th Congress tackles this one.

Last I checked, the Postal Service was serving every address in the U.S., regardless of party or political outlook. The outgoing Postmaster General has given the Postal Service (and by extension, me and us) decades of service. He and his team have given this matter years of consideration. Do we accept his recommendations? Or do we second guess and micromanage reform through a partisan fight?

For those of us in ecommerce: Do we sit silently by, waiting for Congress and a last minute rescue (which will be called a bailout at that point, us having denied the Postal Service the lead time and tools to help themselves), or do we tell our representatives what we think?

Discussion invited on the forums.

Additional links for the adventurous:
http://www.usps.com/strategicplannin...h='decline first'

Updated 11-16-2010 at 04:36 PM by Rafael Zimberoff

ShipRush , Ecommerce