Fewer letters, more addresses: Can the Postal Service keep up?
Interview transcript:
Terry Gerton The U.S. Postal Service is facing a paradox. Mail volume is projected to decline by as much as 41 percent by 2035, yet the number of delivery addresses grows by more than a million each year. A new report from the USPS Office of Inspector General outlines several scenarios for the future of mail, and none of them are easy. Here to explore the operational and financial challenges ahead, the impact of electronic diversion And what innovations might help the Postal Service remain affordable, reliable, and relevant in a digital-first world is David Neu. He’s a research analyst with the USPS Office of Inspector General. Mr. Neu, thank you for joining me today.
David Neu Thank you for having me, I’m excited to share a little bit about the work our team does.
Terry Gerton Well, this is a fascinating report, and I’m excited to talk about it, because there’s enough facts and figures in here to keep a data nerd like me occupied for quite a while. So let’s start with the big numbers, right? The first thing that hits you when you open this is a graph that says mail volume has been declining since it peaked in 2006. Can you elaborate on what’s behind those numbers, what’s going on, what factors are contributing to the decline?
David Neu It’s true that mail volume peaked in 2006. Since then, there’s been a relatively steady decline most years in the mail volume that the Postal Service sees, probably around two to three percent punctuated by some larger declines in years affected by either the Great Recession or the COVID-19 pandemic. You saw steeper declines in mail volume there. But again, mostly a steady decline in the mail volume that the Postal Service sees. And when we’re talking about mail volume here, we’re mostly talking about things like letters, postcards, bills, advertisements. We’re talking about this separately from package volume. The main thing that drives those trends in mail volume that both the OIG and the postal services identified is electronic diversion, which is kind of a catch-all term that describes just in general the replacement of forms of communication such as, you know, writing an actual letter and mailing that letter. With electronic alternatives, so that would be sending an email, sending a text, sending some sort of other digital message for your communication. That trend and the adoption of those technologies by consumers are the primary things that affect mail volume.
Terry Gerton And how do these trends in the U.S. compare to the situation globally?
David Neu So the U.S. is and remains one of the largest markets for mail in the entire world. Americans receive more mail daily than citizens of almost any other country. And then additionally, our mail prices are more affordable. So we’re still a very large market for mail and haven’t seen some of the declines that have been sharper in other countries in mail volume. People here still find lots of uses for the mail.
Terry Gerton As you discuss the decline in mail volume, the report also outlines several scenarios for future mail volume looking forward from 2025 to 2035. Could you explain how you model those different scenarios and what they tell you?
David Neu Our model essentially looks at two factors, and we use variation in those two factors to project six different scenarios for what mail volume could look like in the next decade. So on the one hand, one of our factors is the electronic diversion that we previously talked about. So for each scenario, it’s either going to be steady electronic diversion. So that’s about the current rate of people switching over to digital technologies and changes in preferences. That we’ve seen over past years. And then there’s an accelerated state where, say, there are changes in technologies that really speed up that trend and cause people to switch over to digital alternatives faster. Then on the economic side, we have another factor for the economy and the general rate of economic growth. And that’s set to either a slow economic growth, a steady economic growth again, which kind of just reflects general trends over the past decade. Or accelerated economic growth. So the model is looking at, again, those two things, which are electronic diversion and the general state of the economy. And we’re using those two factors to create a range of scenarios.
Terry Gerton Do you have an opinion on which of the scenarios is going to be most likely?
David Neu I do not; the model we offered is not probabilistic. So we didn’t go out and try to say which is the most likely of these scenarios. And especially with things like economic trends, they’re very, very difficult to predict going forward.
Terry Gerton Within the modeling then, it’s always seems to be a decline in mail volume. So what are the operational challenges that the post office faces as its volume declines and it’s still trying to maintain affordability?
David Neu This is a challenge that the Postal Service has already been facing and adopted some new strategies to deal with. But as mail volume declines, the number of addresses in the country that the postal service serves six days a week across the entire nation, that number of address continues to grow. I believe it’s at about 165 million and millions more are added each year. So you’re delivering less mail to more and more addresses every year, which spreads the delivery network more thin. And makes the cost of each mail piece more expensive to deliver.
Terry Gerton I’m speaking with David Neu. He’s a research analyst in the U.S. Postal Service Office of the Inspector General. So as we’re thinking about the economic growth, the diversion, the decline in volume and the thinning of the distribution network, if I’ve got all those straight, are there any specific economic or technological trends that could alter these projections?
David Neu That’s tough to say. I think one thing we hit on in the report and we talk about is the potential for AI technologies and marketing and communications to change how mail marketing and digital marketing are both used. That could be a positive for the mail. It could also be a negative. Depending on how those technologies are implemented and adopted, we see that as one of the major trends that could affect it.
Terry Gerton It seems like technology is both a challenge but also potentially a solution. Is the Postal Service looking at any technological deployment from its internal side relative to operations that might change how these projections play out?
David Neu I can’t speak to what the Postal Service might be planning in the future using these technologies. I do know that currently they’ve been adapting their delivery network using new technologies to better meet the needs of their consumers, especially as you’ve seen in the shift towards people receiving more and more packages and having a delivery network more centered around.
Terry Gerton As you’ve presented this report inside the Postal Service, have you been surprised at any of the things that Postal service leaders are picking up?
David Neu I would say, thinking about the executives we’ve talked to over the course of the paper, I haven’t been hugely surprised in their reactions to it or the things we’ve discussed actually. I think they have a pretty good handle on the general mail market and the trends there.
Terry Gerton That’s good to hear that they’re not surprised by what you’re projecting, but the report also mentions some legislative and administrative actions that the Postal Service has requested. Could you help us understand what they’re thinking about there?
David Neu As we talked about earlier in the interview, you have this trend in declining mail volume while you’re serving more addresses, and on the business side, some of it is offset by the growth in the package market, but the revenue from mail is still about half of what the postal service brings in, so mail is a very crucial piece for the postal service, and in the future, potentially as volume declines, revenue may begin to decline as well. Currently, it hasn’t declined as severely as volume. However, again, that could be a future challenge for the Postal Service. So some of the things it’s talked about our representatives from the Postal Service have talked about to the public and to Congress have been, so requesting that Congress increase the Postal Service’s debt limit, corrections to pass civil service retirement system over payments and changes to administrative or workers’ comp programs that are administered by them. But the main one that we’ve hit on in previous OIG reports and the Postal Service has talked about as well is allowing the Postal Service to invest its retirement funds, stocks and bonds.
Terry Gerton So those are really talking about the financial operations of the Postal Service and really not mail delivery. If we could get everybody in America to take a look at these numbers, what would you most want them to take away from what your projections predict for the future?
David Neu Our paper predicts a wide range of potential volume declines, ranging from about 14% in the products we looked at up to about 41%. But what remains is that regardless, in any scenario, especially in more rural areas, the Postal Service is going to play a key role for the American people and their communication. And, you, know, you look at things like as simple as paying your bills or just receiving a form from some other government agency is still going to play a crucial role. In those things going forward, and even in other areas like delivering medicine to, again, more far-flung areas of the country that may not be as well-served by other organizations. So I think the key thing there is, you know, regardless of what the decline in mail volume looks like, it’s not going away anytime soon and is still going to be very important for millions of Americans.
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