An annual February ritual is the use of a ground-dwelling rodent to forecast the chances for an end to winter weather. Looking ahead and hoping for an improvement – to the weather or any other condition – is an understandable human activity, regardless of the creatures used in the effort.
In the Rearview Mirror
Last fall, printers and mailers were hoping for a better holiday season than in the recent past – perhaps a low bar to overcome – that would bring a return of customers and an increase in business (and revenue). Individual companies need to evaluate for themselves whether their hopes were fulfilled – some have reported a busy season – but to the extent that commercial mail producers’ business is reflected in Postal Service data, the results of the 2021-2022 peak season are mixed. (The definition of “peak season” varies but is generally used to define the period from Thanksgiving through the end of the year.)
The previous (2020-2021) peak season was an undeniable train wreck for the USPS. Pandemic-driven trends in absenteeism and at-home shopping, coupled with reduced air capacity and a shortage of trucks and drivers, resulted in delays in unloading and processing mail at postal facilities, as well as delays in getting holiday items – especially packages – to postal customers.
Rightly wishing to not repeat that experience, in 2021 the Postal Service leased dozens of buildings, installed scores of package sorting machines, and hired thousands of temporary workers. From all reports, those measures worked as far as they could, though absenteeism was still a problem as iterations of the pandemic swept through the population, limiting the availability of postal workers as well as commercial truck drivers and aircraft pilots.
Just the same, at a mid-January industry meeting, Postal Service executives were very pleased with the results of their months-long planning, reporting that 13.2 billion pieces moved through the system over the period, including 1.245 billion packages. They also cited 94% “on-time service performance” and that mail was delivered in an average of 2.7 days (better than last season’s 3.3 days) though how those numbers were calculated wasn’t explained.
More detailed data was contained in the Postal Service’s December financial information filed with the Postal Regulatory Commission. For the two largest classes of mail – together over 90% of total volume – the numbers were underwhelming. First-Class Mail volume was down 4.2% from last December, which was down 2.5% from December 2019. Marketing Mail volume was up 2.4% over December 2020, but that month had been down 7.4% from a year earlier. Ironically, the wave of packages did not reappear during the recent holiday season. December 2020 competitive product volume (packages) was up 22% from the previous year, reflecting the shop-at-home surge, but package volume dropped by 14.2% in December 2021.
How much the 2021-2022 peak season foreshadowed the rest of 2022 remains to be season, but some estimates can be provided – or not – based on what we know.
At this writing, Congress is on the cusp of passing legislation that would wipe away a significant portion of the Postal Service’s financial obligations. Should that measure be enacted, customers might expect the lower pressure on postal finances would obviate the need for aggressive price increases. However, to the extent comments by the Postmaster General or the agency’s governors are any indication, there’s little likelihood that twice-a-year rate increases won’t be maximized. As of mid-February, the projected rate increase that would take effect on July 10 would be over 6% (on top of a comparable increase only last August) – hardly an incentive for customers to mail more.
At the same time, the USPS is beginning plans to rework its transportation and processing networks, building on the reduced service standards it adopted last October. Though details of those revisions are scarce, they extend the PMG’s desire to optimize surface transportation utilization and cut costs, while concurrently assuming service levels will be maintained. Few industry observers expect the system changes to be quick or smooth, let alone without impacts on mail preparation rules or service performance – hardly another incentive for customers to mail more.
Meanwhile, the Postal Service’s expectations to become a major force in the package business seem increasingly questionable. The most worrisome fact is the overall trend in competitive product volume. After experiencing year-over-year growth every month since February 2020, peaking at over 811 million pieces in December 2020, volume compared to the prior year turned negative in April 2021 and has continued heading lower ever since, with December 2021 volume just 5.4% above 2019, at barely over 700 million pieces. The PMG’s 10-year Plan features package business as a key driver of future revenue, and plans revisions to the postal processing, transportation, and delivery infrastructures to handle the anticipated volume. Notwithstanding recent business initiatives to attract customers, it’s not clear from where resurgent package volume will come – especially with competition from UPS, FedEx, Amazon, and others.
Adding together the long-term trend of an ebbing volume of hard-copy mail, plans for aggressive price increases, a pattern of unimpressive service performance, and growing weakness in package volume, it’s reasonable to find little basis for optimism.
Having said that, however, other facts remain true. There always will be a Postal Service; Congress isn’t about to rescind its public service obligations though it may one day need to consider public support to offset the unrelenting ebb of traditional postage revenue. The USPS has an unparalleled presence and reach, with over 32,000 retail outlets and carriers visiting 161 million addresses six days per week (of course, the cost this infrastructure represents is why Congress may need to help sooner or later). Lastly, trite as it may be, the value of hard-copy messages is irreplaceable – and unmatched – by electronic media. Electrons may be cheaper than paper, but their effectiveness – and value per dollar spent – is another matter.
Here's the bottom line: 2022 will be challenging, but not because of anything new. The USPS will have its usual tribulations, but will still be around in 2023. Printers, mailers, and the extended community of commercial mail, will again have to deal with the challenges of cost vs revenue, applying the best techniques of business development, customer satisfaction, and astute management, to continue finding ways to be sustainable. To paraphrase Annie, though there may be clouds, the sun will come up tomorrow.
Leo Raymond is Owner and Managing Director at Mailers Hub LLC. He can be reached at email@example.com.