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Can the U.S. Postal Service Market Itself to Success?

Forget rain, Sleet, snow and gloom of night. The postal service now Faces something FAR worse: competition. With everybody from FedEx to the Internet bleeding its former monopoly, the agency is trying to reinvent itself with flashy ads and high-tech services.

December 22, 1996|MICHAEL A. GOLDSTEIN | Michael A. Goldstein writes about marketing for New York and Business Week magazines

If you picture the United States Postal Service as the affable but feckless Cliff Clavin of "Cheers," think again. The nation's most enduring symbol of plodding big-government-at-its-worst is striving mightily to reinvent its image: a bit less brusque polyester bureaucracy, a bit more rugged Pony Express, galloping fearlessly onto the 21st-century information superhighway. But can the postal service ride this road? Or is it doomed to be road kill, tripping on the Internet's high-speed wires and run over by Federal Express vans?

The plans are nothing less than grand: The postal service wants to deliver your mail on time so that you use it more often. It wants to introduce new services, such as safeguarding your e-mail. It wants to wrap your packages and sell you phone cards and T-shirts and "Frosty the Snowman" videos. It's introducing a Bugs Bunny stamp and trading cards for your kids, to lure them into philately. And when it absolutely, positively has to be there overnight, the postal service wants you to call 1-800-ASK-USPS (operational next year). Or at least not burst into laughter at the thought.

"We have to be market-driven and customer-friendly," says Postmaster General "Carvin' " Marvin Runyon, speaking like the private-sector refugee he is (Ford and Nissan and the privatized Tennessee Valley Authority), "and make products that people want."

Not since the 1930s, when the post office began replacing trains with airplanes, has this organization faced such flux. The information revolution has created something new and frightening for the postal service: competition. Faxes and e-mail and Mail Boxes Etc. and Airborne Express and FedEx and local messenger services and debit cards are eating into what was once a monopoly.

The postal service has $6 billion in accumulated debt. But this is not its big problem; in fact, it turned a $1.8-billion "profit" last year and will clear $1.6 billion again this year, so the debt is shrinking. The problem is that the postal service delivers six items--letters, junk mail, express mail, packages, international mail and publications--and in each of these, it is losing market share; customers use other services, such as faxes, e-mail and private couriers, for the same tasks. In the business world, another way to say "losing market share" is "dying slowly." Of the 180 billion pieces of mail delivered each year, between 8 billion and 30 billion will disappear by the year 2000. So while the postal service delivers to 125 million addresses, a number that is growing rapidly, each mail carrier has less to carry--fewer pitches from Ed McMahon, fewer postcards from Junior studying in London, fewer batches of cookies from Grandma.

In other words, rising costs, falling revenues. Simple problem. A business would solve it by cutting service to some of the 125 million addresses, like the money-losing ones in, say, Idaho. But the postal service mandate forbids that. So far, the postal service has kept an even keel with those three-cent hikes in stamp prices that seem to come along every three years. But stamp prices have quadrupled since the eight-cent stamp of 1971. Can they rise forever?

Any giant institution--the postal service does $54 billion of business per year, more than Coca-Cola and Caterpillar and Xerox combined--would be hobbled by such challenges. But on top of all the headaches from the information age, the postal service faces its own unique aggravation: the hydra of Washington politics.

The postal service hasn't received tax money since 1982, though it doesn't pay taxes either. It has a monopoly on first-class mail, though there is an exemption that allows private companies to compete for express delivery. The postmaster general is chosen by a presidentially appointed Board of Governors, though he or she ultimately answers to Congress. Then there's a Postal Rate Commission, also presidentially appointed, which, after long months of deliberation, recommends any proposed price changes. For example, when the federal government needs to send packages overnight, whom does it turn to? Federal Express. It sounds insane--Uncle Sam just signed a five-year, $300-million contract with FedEx rather than its own postal service--but it's because the postal service cannot offer discounts, not even to the government, without the commission's approval.

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