Late in every year, it’s inevitable that people ask about the outlook for the following year. To answer any such forward-looking question, though, it’s always necessary to behind us and see what events brought us to this place.
In the postal and mailing world, the trend line of the past year – and, really, since early 2020 – hasn’t been as stable as it could be to support projecting into 2022; nonetheless, some things can be reasonably anticipated.
The Plan
First would be the continued implementation of Postmaster General Louis DeJoy’s 10-year Plan, which he’s made into the postal version of Mao’s Little Red Book. Executives cite it as guiding their actions; postal press releases plug it ceaselessly; and DeJoy dismisses critics as “a lot of opinions” and “noise.”
Following his Plan, DeJoy’s aggressive pursuit of revenue from captive mailers will continue. Referring to the Postal Service pricing authority in an interview during September’s virtual National Postal Forum, he stated plainly that “after 14 years of a lack of pricing flexibility... I’m going to use a lot of it in the first year and probably a lot of it in the second year... I don’t know in year eight if I’m going to use everything that we need to use; I promise to use it judiciously.” Ratepayers who’ve experienced sizable price increases already may question his use of “judicious” and consequently fear what’s ahead
Related to rate increases in the mind of many ratepayers is DeJoy’s decision to slow service for a significant portion of First-Class Mail and some Periodicals. His plan claims that air service is unreliable and expensive, so he plans to move more mail by ground transportation to save money and “achieve service excellence and 95% reliability.” Customers already edging toward the door are seeing slower service paired with higher prices as the last straw. Some transactional mailers have had enough, and are increasingly urging customers to accept online statements and use electronic payments.
In this context, the volume of hard copy mail is less likely to return to anything near pre-pandemic levels and, given the absence of any meaningful support for it in DeJoy’s plan, will depend on the commercial mailing industry to encourage clients to stay in the mail.
Time-tested strategies will be even more important – such as merging lists to optimize density, ensuring address quality, honing mail piece designs to reduce weight and improve machinability, and the usual rate-related measures like optimizing presort, automation compatibility, and destination entry. Commercial mailers will need to find new revenue streams from value-added services, like data processing, mail piece design, fulfillment, and campaign marketing.
Outside Factors
The other arena to watch is the non-postal players who can alter the Postal Service’s trajectory.
Congress, always unpredictable and usually more focused on partisan bickering that actually getting anything done, has had a “postal reform” bill awaiting action for months. The House has readied its version for a floor vote but the companion bill in the Senate is still languishing in committee. Though the measures are generally supported by key stakeholders – the USPS, its unions, and the industry – politicians’ need to block progress on anything someone else could take credit for seems again to be the primary consideration. In 2006, “postal reform” passed in the closing seconds of the legislative session, so anything is possible – but observers shouldn’t hold their breath.
At the Postal Regulatory Commission, they’ll be seeing price increase filings semi-annually, as recently announced by the USPS Board of Governors (supporting DeJoy’s desire to squeeze revenue from ratepayers as fast as possible). In a practical sense, because of the formula used in the ratesetting process, this tactic won’t yield more revenue overall, but will allow it to be captured sooner. Regardless, a rate increase is never an encouraging event for commercial mailers or their clients.
The commission may also see another USPS request for an advisory opinion. A complaint filed with the PRC in mid-October claims one should have been sought on the entirety of the PMG’s Plan, not just on the parts involving First-Class Mail and First-Class packages. No matter: the PRC’s issuances are advisory and, after going through the process, the USPS ignores them and does what it wants.
Meanwhile, a federal court case challenging the commission’s November 2020 decision affording the USPS greater rate authority could be consequential. Still undecided as of this writing, the suit by several mailer organizations claims the PRC’s decision was contrary to the 2006 postal reform law. If supported by the court, it could result in invalidating most of the bases for the Postal Service’s January price hike. Though refunds aren’t likely, prices would need to be rolled back to reflect just what remains legally valid.
Uncertainty Lies Ahead
As readers of the PMG’s Plan know, DeJoy is staking much of the future of the USPS on packages. During the pandemic, package volume soared for all carriers, and the revenue was critical for the Postal Service as letter and flat mail volume plunged. Since then, however, the agency’s package volume and revenue have retreated, but the PMG remains convinced his Plan will grow USPS package volume. According to the Pitney Bowes 2020 Parcel Shipping Index, global package volume could nearly triple by 2026, but the Postal Service’s ability to retain current business, let alone attract more, will rely on its pricing and service – the latter being where it’s challenged most versus its competitors.
The composition of the Postal Service’s governors – nine political appointees serving staggered seven-year terms – is going to be different. The past president had the chance to name six, while the current president has named three and, as of mid-November, nominated two more to replace those whose terms are ending. The resulting shift will put DeJoy loyalists in the minority, and may provide him less protection to do what he wants, particularly on price and service issues that have drawn universal criticism outside his inner circle.
Beyond that, there’s the continuing struggles to find paper on which to print, to find trucks – and drivers – to move mail and packages, and to fill open positions in the wake of labor shortages.
Summing all of this to look into 2022: even optimists will be challenged to find a reason for popping champagne.
Leo Raymond is Owner and Managing Director at Mailers Hub LLC. He can be reached at lraymond@mailershub.com.
