Every day we hear stories about the USPS. Whether it is about the Postmaster General resigning, $9.5B annual losses, rate increases, DOGE, or even talks about privatization; it all sounds like the USPS is the worst-run organization on the planet, but this is far from the truth. What is actually happening is the organization is reacting to our changing mail needs. There are more delivery points that they need to service with fewer mail pieces per stop. They are trying to cut costs, but they are swimming against a tide of the publics’ changing requirements and their limited ability to make change without congressional approval.
The objective of this article is to show you what is happening around mail, focusing on the class makeup, what is being sent, and what you can expect for the future.
USPS Mail Volumes
To simplify the discussion around mail, we will talk about the four main classes.
First Class Mail: This is the most common service and what everyone focuses on when discussing mail volume declines. There are two main ways this is processed:
·Non-Presort – Items deposited into the standard postal stream directly by the client. (Letters, cards, and flats in the chart above). Most of this volume is day-to-day mail sent from businesses but also includes personal items.
·Presort – Items processed in groups of 500 or more, following specific automation processes for postal discounts. This is either done by having software and staff in-house, or, more commonly, by hiring third-party outsource mail preparation services or presort/commingle companies that will pick-up your mail and combine with other clients to get the lowest postage rates.
When you look at mail volume declines, the biggest is with the non-presort segment, which is going down at eight to 12% per year vs. the presort segment, which is only at two to five percent. Also, when you look at the size of the category, 74% is run through presort, making the total reduction in First Class Mail lower at only three to four percent.
We do not see a major change in the current decline rates unless there are regulations that allow organizations to automatically sign clients up for electronic presentment without their approval.
Marketing Mail: This is for promotional content, and like Presort mail, it must be processed in larger groups with specific automation levels for postal discounts. Items must be non-personal in content and cannot have statement level details. The rates are less, and it is perfect for advertising or informational material. The volume declines have been very small in this segment at one to three percent per year, except for major economic corrections. During COVID-19, volumes went down 15%, and we saw similar declines in the recessions in 2001 and 2007. We did see a large 11.5% volume decrease in 2023 that was abnormal, but we believe at least partially due to the large USPS price increases that occurred throughout 2022 and 2023.
We do not expect Marketing Mail volumes to decline in a more drastic way because the response rates from direct mail have held up over the years. It is one of the few ways to ensure that your message is seen by the consumer who may block other forms of media.
Shipping: This is called the Competitive Products segment of the USPS because it directly competes with private carriers like UPS and FedEx. The two most popular products the USPS offers are Priority Mail and USPS Ground Advantage. Priority Mail volumes have declined rapidly over the past three years after continual growth in the 11 years prior. We believe that this shift is mainly from volume moving to Ground Advantage and its predecessor service First-Class Parcel. We also saw huge growth during Covid-19 as the USPS is the only carrier that does not charge fuel, residential, and delivery area surcharges, making it less expensive to get light weight items to homes.
We expect to see continual growth in the Ground Advantage service, especially in the Business-to-consumer segment. We also see USPS expanding their service offerings and increasing their negotiated service agreements with clients that will further enhance this category.
Periodicals: This is for magazines and newspapers delivered through the Postal Service and has seen the most drastic declines (see chart at the top of the article). Volumes are down 41% in the last five years, and we can expect this decline to continue as we get more content on websites and apps accessed through our phones and tablets.
Future Expectations
Based on this continual headwind of declines in volume and customer demand for mail services, the USPS will need to react with limited options.
-Price Increases – Over the last four years, we have seen the largest increases in the history of the Postal Service. Costs on the major market dominant mail classes have gone up 30-64% and we are expecting another eight to 12% increase in July. The price of a stamp in the United States is still the lowest of the major westernized countries and we will need to continue to increase prices to cover costs. There are regulations today that put limits on what these increases can be, and we can expect these regulations to change in order to hopefully give the USPS more control over rates.
-Service Level Changes – We can expect the number of post offices, hours of operation, and service levels to change to try to adapt to the reduced revenue from decreased mail volumes.
-Political Pushback – One of the USPS’s biggest issues is they are not in control to make all the changes that they need. There are laws in place about the amount they can increase prices, pensions they must cover, and service standards that are expected. This limits their ability to adapt to our changing mailing requirements.
-Privatization – While we do not know if this will occur, this option could be viewed as an easy way to remove over 600,000 employees from the federal government, even if they are part of a self-funded organization. We would expect drastic changes to the way mail is serviced, including closing some Post Offices and having them part of other retail stores, reduced service levels, and distance-based prices that would make it more expensive for people in more rural and difficult to support areas.
When you peel back the onion, mail volumes are going down three to five percent per year, but there are still over 111 billion pieces of mail generating $80.5B in the United States. This will be a very gradual decline due to our dependence on core mail services in order to get paid by customers, have packages delivered, and to be able to get our message heard. The USPS is going to have to be more aggressive in adapting their network to these reduced volumes and pushing for more control to make the changes needed.
Adam Lewenberg, CMDSS, MDC, President/CEO of Postal Advocate Inc., runs the largest Mail Audit and Recovery firm in the United States and Canada. They manage the biggest mail equipment, postage and mail related services portfolio in the world. Their mission is to help organizations with multi-locations and mail streams reduce expenses, recover lost postage funds, and simplify visibility and oversight. Since 2011, they have helped their clients save an average of 74% and over $92 million on equipment, postage, shipping and outsourced mail service fees. He can be reached at 617.372.6853 or adam.lewenberg@postaladvocate.com.
This article originally appeared in the May/June, 2025 issue of Mailing Systems Technology
