The US Postal Service is dying, which is why Postmaster General Patrick Donahoe is heading to Congress today to beg for help to avoid a winter shutdown.
So why has the USPS gone into the gutter while its biggest competitors — FedEx and UPS — pull multi-billion dollar profits despite the rise of email? Let’s take a look.
The most obvious drain is the unions, and it’s the big thing Donahoe has tried to address. He’s asking for permission to cut the health and retirement plans for his half million employees and replace them with new programs, and try to impose significant layoffs. labour is 80% of the Postal Service’s expenses, compared to 53% at UPS and 32% at FedEx, according to the New York Times.
But there’s a problem that runs deeper than its significant labour woes. The USPS brand is hurting, badly. Its product is just inferior to FedEx and UPS — at least in consumers’ minds.
Customer satisfaction matters, and the Postal Service doesn’t provide the value people demand. The American Customer Satisfaction Index reported in June that UPS topped the mail services industry with an 85, with FedEx falling behind to 83.
The USPS scored a 79 in express mail and a dismal 74 in regular mail — and that’s actually an all-time high. “Indeed, higher satisfaction with the Postal Service might reflect a dwindling customer base, the most loyal of whom is also the most satisfied,” the report explains. “The more dissatisfied customers may already have left.”
So what’s causing this disconnect?
People don’t like the experience of dealing with the Postal Service, and going to the post office has become more of a hassle than heading to a UPS or FedEx spot to get a package shipped off. Once easily the most economical shipping option, the Postal Service’s rate hikes have made it easier for customers to ignore whatever price advantage is left, and go to where they think they’ll be treated better.
As for the product itself, the Postal Service can deliver to every home and business in the country — a feat none of its competitors could possibly match — and it can offer a much better price in certain situations. Its competitors even rely on it to deliver hundreds of millions of their letters each year. Yet, UPS and FedEx have surpassed the Postal Service on plenty of other levels, such as shipment tracking technology, on-call pickup and delivery times.
And it’s not staying consistent in its communication with consumers. Its latest big move to fight off FedEx and UPS was the introduction of priority flat-rate boxes, and the ad campaign revolved around the ease of use for “if it fits, it ships.” It apparently followed through on that promise, but then hurt itself by turning around and refusing customers free priority tape for the packages, despite the practice being considered a norm for many.
The Postal Service can’t be fixed by simply privatizing. It would have to reorganize to become more efficient, rebrand to change the way consumers perceive it, and reevaluate what it can offer customers above what UPS and FedEx do by focusing on what it does best.
But its immediate issue still lies with its bottom line. Remember, the USPS is a government agency that’s funded by its own sales, not tax dollars, and it’s supposed to run at cost. Instead, it’s losing billions annually, and it can’t be fixed solely by cutting jobs, locations and changing its pricing model.
Simply put, the Postal Service must survive to be able to change, and it must change to survive.