April 25 2007 11:37 AM

Growing up in the central part of Connecticut in the late 1970s and early 1980s, I delivered the Hartford Courant newspaper. Every day. At 5:30 in the morning. For five years. Each kid in my family had a paper route at some point, and we delivered the paper to the doorstep of each house on our route. Then, on Friday evenings, we would make the rounds again and collect weekly payment for each household's subscription.


I look back and think about what a huge responsibility that was for a 12- or 13-year-old. I also think what a great gig the newspapers of America had going. Hire pre-teen kids, pay them well below minimum wage and leave it up to them to collect payment, taking it out of their own profit if someone didn't pay on time.


This isn't the delivery model for newspapers any longer. How many of you get your morning newspaper delivered to your doorstep? How many of you have a kid deliver your papers? I know that in my neighborhood, an adult delivers over a very wide area and throws papers out the window of his car as he rolls by. If it lands in the general vicinity of our front yard, we consider it decent service.


The delivery and collection model for newspapers has changed. And while delivery might not be as good as the old days, people have adjusted. Over time, most people won't even remember that adolescent go-getters used to deliver the morning newspapers. Few of my generation even realize that most of the major newspapers at one time printed a morning and an evening edition.


The point is: business models change. They have to. They have to improve efficiencies. They have to drive out costs and increase revenue. One thing to remember is that customers also change. Their needs will not be the same tomorrow as they are today. They also adapt to the changes thrust on them by their suppliers or the market itself. Sometimes, it takes time to change. Sometimes, it's not always a good thing. I would argue that in some service industries, customers eventually lower their expectations, lowering the threshold for service and, thus, satisfaction. But this opens the door for new entrants to the market, especially those that raise the bar on service or performance or price.


The Postal Service finds itself with an evolving business model. Big change is coming, but gradual change has been occurring. Customers' needs are changing, too. The key to a successful postal system, especially one that faces increased competition, is to understand customers' needs, and then to capitalize on them. The Postal Service cannot lower the bar on service and performance. Indeed, this would be the surest way to drive customers to other media outlets.


Over the past 15 years, the volume of single-piece First-Class Mail has dropped considerably: from 60 billion pieces in 1990 to 44 billion in 2006. This decline
in single-piece First-Class Mail accelerated in the early 2000s, declining almost 11 billion pieces from 2000 to 2006.


The Postal Service saw growth in what we call "work shared" First-Class Mail business First-Class Mail entered in bulk over those same years, which was strong enough in the 1990s to offset the loss in single-piece First-Class Mail. However, in the 2000s, the growth in work shared First-Class Mail was not big enough to offset the loss of contribution from single-piece mail.


It's probably fair to say that the so-called "death spiral" has been exaggerated over the years. Mail hasn't gone away. Indeed, total mail volume for the USPS (mail in all classes) has grown from 166 billion pieces in 1990 to 213 billion pieces in 2006. But it's clear that the pie is sliced differently now than 15 years ago. The most profitable types of mail are no longer seeing robust growth: single-piece First-Class Mail is declining, and work shared First-Class Mail is growing at a slower pace than in the 1990s. This has resulted in an overall stagnation of total First-Class Mail volumes.


On the other hand, Standard Mail has seen strong volume growth since 1990. With the exception of two blips in the years around the terrorist attacks and the ensuing weak economy, Standard Mail volumes have grown every year since 1990. It now makes up almost half of the total mail volume compared to only 38% of total volume in 1990.


So, what are some of the practical implications of these volume numbers? For one thing, I think the Postal Service has done the right thing in removing blue collection boxes. It often gets criticized for having removed collection boxes from street corners, but I think it's a wise move. This is a shrinking part of its business. The USPS is reducing costs by eliminating the need for carriers to make frequent sweeps of collection boxes. This is an efficient move. There are more opportunities on the retail side, which the Postal Service has indicated it intends to pursue, including alternatives to post office retail transactions.


On the commercial side, the Postal Service needs to focus on what it can do to encourage business mailers to stay in the mail and to increase their use of it. One idea would be to look at ways to make mailing easier for commercial mailers. Do we need a Domestic Mail Manual that is bigger than an unedited Harry Potter book? I've heard it referred to as "necessarily complex." But does it need to be this complex? We won't get it on an index card, but we could streamline some rules and ditch some altogether. Frankly, I'd like to blow the whole thing up and start from scratch, writing rules that actually pertain to today's mail environment. Yes, rules would have to be set so mail fit the parameters of postal equipment, but how about designing the equipment with the future needs of marketers in mind. This might be granular reform, but it's no less reform than overhauling the ratemaking system.


I'll leave you with those nuggets to chew on for a while. Next time, I'll take another look at new opportunities and challenges. In the meantime, if you want any background volume data referred to in this column, drop me a line. I have plenty.


Kate Muth is Vice President of the Association for Postal Commerce, a trade association in Arlington, Virginia, that represents the interests of mail-related businesses before Congress, the Postal Service and the Postal Rate Commission. She has studied and written on postal topics for the past 12 years. You can reach her at kmuth@postcom.org or 703-524-0096. For more information on the association, visit www.postcom.org.