Thursday, December 26, 2013

"The Post Office is Dead. Long Live the Post Office". The price of a stamp is increasing in January. Send an e-mail, text or instant message to tell all your friends! Oh, wait...

On Christmas Eve, the governing board of the US Postal System approved an increase in the price of a first class stamp.

Postal Service Raises Price Again but Says It’s Not Forever

The cost of first-class postage stamps is going up by 3 cents — but only until the Postal Service makes up losses that it has estimated it accumulated during the recession. The increase — to 49 cents from 46 cents will go into effect on Jan. 26.
The Postal Regulatory Commission announced the increase on Tuesday, but it stressed that it would “last just long enough to recover the loss.” The commission determined that loss to be $2.8 billion, caused by a substantial drop in mail volume, totaling about 25.3 billion pieces, between 2008 and 2011.
That is a 6.5% price increase in the price of an individual First Class stamp.

Here is a look at the price changes of stamps since 2002:
Source: HERE
In 2002 the price was $.37.  At the new price of $.49 that means the price of a stamp has increased 32% in 10 years.

Since 2002 the volume of First Class mail has gone from 102,378,632 pieces to 66,700,419 (Fiscal Year 2013--Source HERE).  The volume of First Class mail has DECREASED by 35% in 10 years.

Here are the year over year changes in the volume of First Class mail since 2002 (source HERE):

2002-2003  -3.2%
2003-2004 -1.1%
2004-2005  +.1%
2005-2006  -.5%
2006-2007  -1.6%
2007-2008  -4.8%
2008-2009  -8.6%
2009-2010  -6.6%
2010-2011  -6.4%
2011-2012  -5.6%

2012-2013  -4.2%

Pre and Post Recession(s) all (except 2004-05 with a slight increase) have negative percentage changes.

I believe the Post Office is in a no win situation. First Class mail as a business is in decline as a result of differing forms of communication (e-mail, text, fax, etc).  It cannot decrease prices in hopes that it can win over market share. They could offer free mailing and I don't think it would much stem the declines in the numbers you see above.

All they can do is milk the current segment of the market that is relatively insensitive to the change in price. But even that segment will drift away as they move to some other form of communication. The presence of substitutes is a cruel master in the market place!

My opinion is the US Postal Service will eventually have to "spin-off" the delivery of First Class mail and cede ownership of it to the Federal Govt where it will reside forever more and not have to worry about making a profit.  The Post Office is a creature feature of the US Constitution (Article 1, Section 8--an explicit power) so its basic function of delivering mail will not cease.

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