How Long Will Postal Mail Stick Around?

By Ron Wiener, CEO, Earth Class Mail

Reporters, investors, and other people I meet often ask me, “How long do you think it will it be before postal mail goes away altogether?” Now, I’m in the alternative postal-mail delivery business. I’m also a technologist who built his first computer in high school 26 years ago. Not surprisingly, I may be somewhat biased in my response.

The postmaster general of the U.S. Postal Service, answering this question in front of Congress, or the CEO of Pitney Bowes, answering this question in front of Wall Street analysts, might also be somewhat biased in those situations. In light of pressure from labor unions and millions of postal workers, the paper- and printing-industry lobbyists, the direct-marketing industry, and decades of calcified tradition and habit, I don’t envy these officials’ public-facing responsibilities.

The long-term future of postal mail is a question that the founders of Earth Class Mail in fact had to answer for ourselves before we sunk millions of dollars into launching a business that ostensibly relies upon the continued existence of postal mail.

For a long time my favorite quip response to this question was, “There’ll be a paperless office when we’ll have a paperless toilet.” That quip served me well until an experienced world traveler pointed out to me that paperless toilets now exist in Japan. I’m now looking into buying one so that I can reduce my carbon footprint and never buy toilet paper again.

The forces of change can arrive in the form of blazing electrons, like the Internet, or glaciers that might move only a few inches per year. Many people say that postal organizations are more likely to embrace change on a geological time scale.

In fact, while postal volumes were growing rapidly in the late 20th century, few posts were interested in glimpsing the road that lies ahead of the next curve. But with the advent of electronic transactions and electronic marketing media, postal organizations are being forced to think of themselves as part of a larger ecosystem, and to decide whether they are going to stand in front of the tidal wave of change when it comes barreling down upon them, or whether they will be bold enough to surf the wave and help drive changes that will be good for the environment, the economy, and ultimately their long-term relevance and jobs sustainability.

In traveling around the world and meeting with the CEOs and regulators of post offices from dozens of countries, I have observed the full spectrum of responses to this stress condition. Some countries are actually intent on eliminating some traditional postal jobs and providing even better employment situations to those workers — jobs that won’t involve driving in traffic, walking on ice, escaping rabid dogs, trudging through gale-force winds, or suffering the classic physical ailments that beset a career postal carrier, driver, and bored-to-distraction sorting-machine operator.

The innovative posts, usually privatized, are intent on replacing dreary, wearisome jobs with higher-paying, safer indoor jobs in which the posts can extract revenue from processing documents — i.e. monetizing the contents inside the envelopes — rather than feeding off the lower-value work of physically toting the envelopes around. Other countries? Well, they’re still trying to figure out how to put barcodes on mail and they just aren’t ready for the future quite yet.

There’s a rough correlation between posts that are more forward-looking and posts that carry a significant percentage of advertising mail. Many countries don’t have an advertising-mail industry to speak of, either because their economies are not sufficiently developed or their privacy laws limit companies from renting mailing lists. Industry analysts refer to countries that allow and encourage advertising mail as being “mature.” It may surprise Americans to hear that in many countries there’s no postal delivery to homes at all (just to PO boxes), or that there are still vast regions of the world in which postal service will likely never materialize before Internet connectivity does.

In terms of ecological and economic impact, 55% of the world’s mail volume is delivered right here in the United States, and more than half of that volume is now advertising mail. While the USPS is the largest postal operator in the world — with 38,000 buildings and 250,000 vehicles on the road plus 800,000 workers commuting every day (one out of every 188 working Americans is a postal worker) — it is actually the most productive post in the world because of its vast economies of scale. Nevertheless, it is the third-largest Federal consumer of energy in the U.S. (after the DOD and DOE), and it pushes 15% of all paper manufactured in the U.S. (our third most toxic manufacturing industry). As a result, it ranks as one of the largest single targets for ecological and economic change in the country, if not the world. Al Gore, take note!

Globally, post offices and related printing and mailing industries employ 9 million people and are collectively a multi-trillion-dollar economy of their own — bigger than the GDP of many countries. Yet few industries are as likely to feel the impact of societal trends on technology or ecological reform as dramatically as the postal industry is feeling such pressures now. But creating meaningful change in this sector has proved difficult. As one wag observed, it may be easier to change the orbit of the moon than change the postal-delivery industry. But strong gravitational forces are already at work on moving posts to adapt to a new climate, and these forces are only getting more powerful.

Transactional Mail

First Class mail, containing correspondence, bills, statements, and other important documents, is giving way to electronic transactions — but not as fast as you might think. Despite the availability of online billing, booking, payments and such, over 100 billion pieces of transactional mail are still delivered annually by USPS, including some 34 billion paper instruments of financial exchange called “checks.”

As the population grows — along with its appetite for credit cards and bigger homes — certain categories of transactional mail are actually increasing in absolute volume. But in other parts of the world the overall volume of First Class mail has been declining at a rate of 1% to 4% per year since 2000. Though all the big banks offer paperless online services now, many consumers still won’t switch to electronic banking, and many businesses are too small to fund the development of online transaction processing for, say, your local landscaper who still sends you a paper invoice and brochure by mail.

Old habits live on like plastic bags in a landfill. Ironically, according to the EPA only 22% of mail is recycled, so the other 78% of discarded paper mail leaches a chemical broth into garbage mounds, and groundwater — not to mention the environmental impact of manufacturing and recycling paper products in the first place. Plus, we have to factor in the greenhouse gases emitted during the transportation required throughout paper’s life cycle from forest and chemical plant to the paper mill, to the paper distributor, to the commercial printer, to the mail presort bureau, to the post office, through the postal network and to your mailbox, then to the landfill.

Advertising Mail

More than half of the USPS’s volume of mail is now Standard Class advertising mail. By weight this aptly named “bulk mail” represents an even bigger majority of that volume. Each postal carrier will deliver 17.8 tons of advertising mail in a year. As long as marketers need to reach existing customers and concurrently generate new customers, they will look to postal mail as a key channel to promote their offerings.

Spam e-mail is illegal now, but because Congress feels that any mailer wishing to pay real money to mail an offering should be allowed to do so without restriction, hard spam in the form of advertising mail is not illegal, and likely never will be. Schemes to protect the privacy of consumers will come and go (see my blog entry, “The Inconvenient Truth About Junk Mail Removal Services”), but the economic need for companies to generate business via mailed offerings — and the need to maintain postal, printing and paper-related jobs — will keep elected officials from turning off the spigot. Even the airlines are adversely affected when they lose deferred-air contracts to transport mail.

In the ultimate of ironies, even Greenpeace uses advertising mail to fund itself through donor solicitations because of their cost-effectiveness. Direct-mail advertising is still a “necessary evil.”

There’s also a third category called Periodicals — or “Second Class” Mail — but because most periodicals are just another form of paper-borne advertising, let’s agree for argument’s sake that these publications are just another component (albeit a shrinking one) of advertising mail.

So where do these trends lead?

The most obvious conclusion is that posts that remain solely physical-distribution networks will eventually find their primary purpose to be the delivery of (mostly unwanted) advertising mail, and only a shrinking secondary purpose will be the delivery of transactional mail for the ever-smaller community of planet-abusers and Luddites. Postal carriers already must endure the complaints of customers who feel put upon to have to sift through and dispose of so much “junk mail” yet begrudgingly do so because they know that important things in the mailstream remain worth sacrificing for — prescription medicines and letters from soldiers’ loved ones, for example. And samples of toothpaste that’ll make your teeth whiter.

As business entities, the posts have become great beneficiaries of the burgeoning use of the Internet thanks to increased parcel shipping. As buying dollars shift from retail to online and party-to-party sales (think eBay), the package-delivery business has been booming. Unfortunately for posts, however, parcel delivery is not a monopoly business like letter mail is, and staying competitive with enormous and efficient express-delivery carriers is very difficult for a postal service that has more regulatory and financing hoops to jump through in order to compete.

The U.S. Postal Service is staffed by members of the nation’s largest union (in fact, the largest in the world). Highly unionized posts are usually the largest employers in most other countries as well. These unions have more political pull than that of any other labor group. When looking to adapt to changing trends, posts have to contend with unions that want only to pour molasses and sand into the gear works of any change agenda that could that lead to a reduction in workforce and/or wages.

Even the most progressive posts in the world are resigned to this union resistance. Anything they want to introduce or implement that entails the transformation of a post from a physical distribution network to an online brand for trusted electronic communications raises the ire of postal workers who often don’t appreciate the need for “creative destruction” in order to save their jobs.

The average person and even the savviest of Wall Street executives has likely long forgotten, or is too young to remember, that Western Union was once the largest company in the telecommunications field. It held a virtual monopoly of over 90% of the telegram business. Then an upstart called AT&T came along and started eating the lunch of Western Union with a voice technology far superior to telegraphic “dits” and “dahs.” In fact, Alexander Graham Bell first offered his patent for the “talking telegraph” to Western Union for a price of $100,000, but the company decided that it would rather continue to enjoy its highly profitable virtual monopoly (over 90% share) than to expand into a new technology.

At first the mighty Western Union dissed the entire idea of long-distance telephone communications and vilified the in-home telephone as an offensive invasion of privacy. It pointed to the outrageously high cost of making a phone call compared to sending a telegram. It even whined about the loss of message-courier jobs for teenage boys, often their first work experience. And ultimately, Western Union failed to recognize the consumer’s perspective of how great it would be to be able to receive a call on your very own telephone, instead of needing a telegraph operator and teenage courier to send and deliver, respectively, a paper message. It eventually dabbled in the telephone business itself, but it would not be able to gain enough leverage over more innovative competitors to dominate telephony. In 1909, once-small rival AT&T actually acquired control of Western Union — only to divest it in 1913 under the pressure of prosecution the new Sherman Anti-Trust Act.

As the nips at its ankles became bites and gashes, Western Union solicited Congress for legislative protections of its communications monopoly on the grounds of public interest. But the mighty telegram company wasn’t deemed to be in much need of protection when it could itself simply practice creative destruction and use its vastly larger resources to reinvent itself as a major telephone company and squash little AT&T.

We may not have learned in school about how this historical transformation began, but we sure know how it ended — communications costs eventually plummeted and Western Union’s all-powerful telegram business declined precipitously, giving way to the innovation of the long-distance telephone network. By the time telegraph message volume peaked in 1945 (245 million domestic messages that year), AT&T’s revenues alone already dwarfed the entire telegram industry’s revenues by 10 to one.

Are posts predestined to repeat Western Union’s mistakes, to hold on to traditional delivery methods for so long as to be undone by societal and technological change? Perhaps some aren’t. Over 100 of the world’s posts have successfully begun to privatize and act more like rational corporate enterprises responsible to shareholders, customers and employees. This group includes all of the European Union’s posts as well as those in Japan, Canada, New Zealand, and in fact all industrialized nations — except for the USA.

In Japan, the breakup of the national postal service — the largest employer in the country — was the pivotal issue that drove the election of Prime Minister Junichiro Koizumi. Opponents of Koizumi’s breakup plan claimed that it would result in the closure of post offices and job losses. Proponents of the plan contended that privatization would allow for a more efficient and flexible use of the company’s funds that would help to revitalize Japan’s economy, which is still recovering from a series of four recessions since 1991. After declaring the election to be a referendum on postal reform, Koizumi won both and privatization finally began taking effect in 2007.

Should the USPS be privatized? Without question! Given the vast body of evidence from dozens of large posts that have successfully begun transforming themselves, there’s no longer any rational argument for maintaining the postal monopoly in letter mail. Privatized posts are now scrambling to figure out their strategies for maintaining relevance and prosperity in the digital age while the USPS remains in staunch denial that privatization is necessary.

This discussion did not enter the political arena during any significant 2008 election’s debate (though Republican candidate Ron Paul raised the issue, albeit without offering any solutions), and it may not yet for a few more years, but as more and more citizens become aware of the ecological impact of inaction — and as evidence mounts from successful transformations of posts in other countries — privatization of the USPS will inevitably become a major item on the political agenda in the coming years.

Earth Class Mail has shared openly with national posts its trove of statistical market data from the usage patterns of its own customers, who now access their mail online from over 130 countries. We show these posts that a staggering 94% of mail contents delivered electronically to our customers today are not wanted in physical form once scanned. People want the information on the paper, not the paper itself. (The other 6% is mostly checks, which we will soon begin depositing electronically for customers.) When we show these PowerPoint slide graphs to postal officials, their reactions are often visceral. One postal GM recently said to us, “I’m shuddering at this realization and what it means in light of the tens of thousands of carriers and other employees who would be affected, but we understand that we have to change, or die.”

What is to become of “postal mail,” then?

Postal mail will eventually divide into online and offline mail delivered by the trusted national brand carriers and their competitors. Offline physical mail will continue to shrink, but progressive post offices will adopt new online delivery platforms for every citizen and business in their respective countries (quite a few are already considering the deployment of Earth Class Mail under their own brands) and will translate their constitutionally ratified, trusted brand to safe online communications. New varieties of pay-per-action postage, rich-media, online-advertising technologies will eventually take the place of hard-copy advertising mail — and posts are the ideal organizations to bring these technologies to market.

Ultimately online advertising platforms will be bigger than postal ad mail and search-engine marketing combined, because they will scale better, will be far more targeted and engaging to the end user, and will reduce risks and costs to marketers. Most importantly they will reduce the impact to the environment by mammoth proportions.

So will postal mail ever completely go away? Will mailboxes around the world be plucked out of the ground and 9 million employees be forced to find new jobs? Will 660,000 branch offices be shuttered forever? Not likely in the lifetime of any contemporary reader of this article, but much of what is now delivered in paper form will be delivered electronically by the posts who choose to architect their own creative destruction rather than be eliminated by new electronic alternatives already bursting into the marketplace.

February 21, 2008 | Filed Under Earth Class Mail 

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