USPS Could Close Thousands More Post Offices

Automated Postal Center could allow USPS to close thousands more post officesFifty years ago there were gas stations on every corner, pharmacies and small groceries every few blocks, and post offices in every neighborhood. Today, all that has changed; except post offices, of which there are still about 32,000. As the Post Office continues to hemorrhage money, it's not surprising that one idea on the table is to close thousands more post offices, the ones that lose money every year.

The reasons that the Post Office loses money are many. The volume of mail peaked in 2006, then tanked as the recession took hold, down 3.5% in fiscal year 2010 alone. In 2000, the Post Office brought in an average of $1.80 per delivery. By 2009, that revenue was down to $1.40, and is projected to reach $1.00 by 2020.The blend of mail, personal vs. business, is also contributing to the problem. It takes three pieces of advertising mail to equal the profit from one first-class letter (7 cents vs 22 cents), yet the proportion of first-class mail continues to dwindle as electronic media become increasingly popular.

The Post Office is also strapped with high employee costs and a government mandate to pre-fund future retiree health benefits, to the tune of $5.5 billion in 2010.

When it comes to controlling costs and raising revenues, the Post Office is somewhat constrained. Raising the cost of first-class mail is something we've become inured to, but could face the law of diminishing returns: the higher the stamp costs, the less mail people send.

However, the Post Office isn't permitted by law to close its locations simply because they lose money, and more than half do. It has lobbied to change this law, and legislation currently in the works would free it to do so.

What would happen? According to recent testimony by Postmaster General Patrick R. Donohoe, we might expect
  • Closure of thousands of locations
  • Reduction in frequency of delivery (goodbye, Saturday delivery?)
  • More widespread use of automated postal centers, machines installed in many post offices today as an alternative to standing in line for a live clerk. The average APC already generates $240,000 in revenue per year, more than is generated by 19,000 smaller post offices.
  • Non-post-office outlets. The Post Office is already partnering with Office Depot at over 1,000 locations to offer basic postal services such as stamp sales and flat-rate boxes.
The post office has borrowed as much as it is allowed to from the federal government ($15 billion) and its projections of decreasing business and increasing costs show that, short of a legislative fix, it will be flat broke in 2011.

Expect change, probably painful change, if you're a fan of the local post office and six-day delivery.
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