Alternatives to the Post Office: Expanded Access in FY 2013

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The APWU is currently sending delegations to Staples stores in their communities to meet with store managers to protest the postal counters that have been installed at 82 stores, with plans for more.  After the visits, the APWU plans to organize a day of action at Staples stores around the country, followed by sustained actions at a number of stores where postal retail units have opened.

Putting these contract postal units — or “mini post offices,” as they’re being called — in Staples is a threat not just to union jobs but to brick-and-mortar post offices in general.  It represents the latest initiative by the Postal Service to get rid of post offices — something it’s been wanting to do for a long time, with encouragement from a variety of sources.

Some big mailers — like Valpak, for example — view post offices as a financial burden on the Postal Service, and they would prefer alternatives that are less costly to operate, like CPUs, to help keep their rates down.  Advocates of privatization, like the National Academy of Public Administration, recommend privatizing the retail network by replacing post offices with postal counters in retail stores, gas stations, schools, coffee shops, movie theaters.

The GAO regularly issues reports about how much money could be saved by closing thousands of post offices.  The GAO has been doing this for decades.  In 1975, for example, it issued a report recommending that Congress change the laws on closing post offices so that the Postal Service could close 12,000 post offices and save $200 million.  A 2011 report recommended much the same, and pointed to all the cheaper alternatives, like kiosks, CPUs, and stamp retailers.

President Bush’s 2003 Commission on the Postal Service recommended expanding alternative access as a way to pave the way for post office closures, and the 2006 Postal Accountability and Enhancement Act (sec. 302) made that recommendation part of the law by directing the Postal Service to expand “alternative retail options” like vending machines, kiosks, the Internet, and “retail facilities in which overhead costs are shared with private businesses.”  The Postal Service doesn’t really hide what it’s all about.  In 2011, it called the plan to close 3,700 post offices “Expanded Access.”

In accordance with PAEA, every year the Postal Service summarizes the progress it has made in expanding retail access as part of its Annual Compliance Report (ACR).  The Postal Regulatory Commission then reviews the numbers as part of its Annual Compliance Determination Review (ACDR).  As a result of the compliance review, a lot of the data about post office closures, contract units, and so on becomes part of the public record.

Both the ACR and the ACDR, it should be noted, basically take it as a positive thing that access to postal services is being enhanced in many ways.  They don’t explore the fact that “expanded access” is largely about closing post office.  In any case, here’s a look at what this year’s ACDR has revealed so far with respect to alternative retail access.

 

Sources of retail revenue

As part of the compliance review, the Postal Service has provided the PRC with a table showing how retail revenues break down by channel.  Here’s a modified version of the table showing the numbers from last year as well.  (The original table can be found here.).

Retail Revenue Channels FY 2012 – 2013
FY2013 (in $ millions)
% Total Retail Revenue in 2013
FY2012 (in $ millions)
% Total Retail Revenue in 2012
Change from FY2012
Change from FY2011

Post Offices

$10,723

58.8%

$10,627

60.9%

0.02%

-3.6%

PC Postage

$4,322

23.7%

$3,604

20.7%

19.9%

4.1%

Retail Partner Stamp Sales

$1,166

6.4%

$1,226

7%

-4.9%

0.2%

Automated Postal Kiosks

$457

2.5%

$497

2.9%

-8%

-0.4%

Stamps by Mail/Phone/Fax

$544

3%

$517

3%

5.5%

0%

Contract Postal Units

$350

1.9%

$376

2.2%

-1.3%

-0.4%

Click-N-Ship

$524

2.9%

$484

2.8%

8.4%

0.1%

Other

$133

0.7%

$119

0.7%

12%

0.1%

Total Retail Revenue

$18,223

100%

$17,450

100%

4.43%

2.9%

As the table shows, retail revenues actually increased this past year, and most retail revenue continues to come from post offices, where revenues are up by about $100 million.  Revenues from many of the alternatives — like stamps sold in kiosks and on consignment at retail partners — are down.

The only alternatives to the post office that are showing signs of real growth — PC Postage and Click-N-Ship — aren’t really alternatives per se.  They are just ways for small businesses, e-commerce sellers, and individuals to buy postage online and print mailing labels in the office.  People still need to take their packages to a post office, which often doesn’t even get revenue credit for the work done there.

 

Contract Postal Units

In the U.S. we have a long tradition of contract postal units (CPUs) and community post offices (CPOs) run by private businesses and institutions like universities.  They provide most postal services, they are often run by people who have a genuine concern for the community, and for many customers they are indistinguishable from regular post offices.  They are thus often cited as one of the best ways to replace post offices and cut costs.  But the numbers tell a different story.

Earlier this week, the Postal Service gave the PRC a spreadsheet on CPUs and CPOs as part of the compliance review.  It shows that at the beginning of FY 2013, there were about 3,340 CPUs and CPOs.  At the end of the year, there were 3,232 of them, for a net decrease of about one hundred.  Something like 200 new ones opened during the year, while about 300 of them closed.

(The lists are on Google Docs here; they come from a PRC docket, here.  If you’re looking at the lists, note that about 175 facilities on the list of those open at the beginning of the year are duplicates — the contract was terminated then renewed.  For the same reason, 175 on the list of facilities that closed during 2013 didn’t really close; they appear on the open-at-end-of-year list.  A corrected list of those that closed is here.)

The number of CPUs has been steadily declining for a long time.  In 1970, there were 7,241 of them; now there are fewer than half that many.  The total number has been going down at the rate of about 90 a year, approximately the same rate as post offices closures.

Not only has the number of CPUs declined.  As the revenue table above shows, the total revenue from CPUs in 2013 went down 1.3 percent.

Despite their declining numbers, this drop in revenue, and the relatively small portion of total retail revenues that CPUs bring in, contract units are constantly mentioned as a great alternative to regular post offices.  Advocates of postal liberalization always point to the fact that postal systems in other countries have replaced their government-run post offices with franchises, counters in private businesses, and other contract relationships.  The GAO is another big proponent of contract units, as illustrated in this report, which complains that despite the benefits of CPUs, the Postal Service isn’t doing enough to create new ones.

But CPUs have problems, which explains why their numbers aren’t growing.   It’s sometimes difficult for the Postal Service personnel in the administrative post office to do proper oversight since they aren’t there on the premises of the CPU.  It’s sometimes even a problem collecting all the money that’s due to the Postal Service, as discussed in a USPS OIG report entitled “High-Risk Contract Postal Units.”  Asked about the problems, the personnel at the host post offices “attributed these issues to employee turnover, inadequate training, and other higher priority duties” at the business operating the CPUs.

Another big problem with CPUs is that they can be closed without going through any of the legal procedures for closing a post office, and they can close overnight without any community input, which just happened twice a couple of weeks ago.  In Salem, Connecticut, citizens simply found a note on the door of the CPU saying it had been permanently closed, and in Aiken, Texas, the CPU closed on January 1 because the operators chose not to renew the contract.

Opening hundreds or thousands of contract postal units in big box stores like Staples may look like a viable way to close post offices and save money, but the history of CPUs shows that may not be the case.

 

Village Post Offices

While the number of CPUs continues to decline, the number of Village Post Offices (VPOs) is increasing.  In FY2013 the Postal Service opened 338 VPOs, bringing the total to about 430.  In the ACR, the Postal Service also says that it hopes to open a total of 400 new Village Post Offices in FY 2014.  The current USPS.com list of VPOs as of January 6, 2014, is here.  It shows 483 VPOs.

We’ve created a list of these VPOs that also includes post offices in the same zip code; that list is here.  It shows that in all but 36 cases, there’s a regular post office in the same ZIP code area as the VPO.  In about 340 cases, it’s a post office that has had its hours reduced under POStPlan.  For the most part, then, VPOs are being used to supplement POStPlan post offices with reduced hours and not to replace post offices, as VPOs were originally intended to do when the concept was first announced back in 2011.

The PRC hasn’t yet requested much information about these VPOs for its compliance report, but perhaps that’s coming.  It would be helpful to learn more about the services they offer, how many have closed, and how much revenue they bring in.

In the ACR, the Postal Service says VPOs offer a range of popular products and services including PO Boxes, First-Class Mail Forever stamps, and prepaid Flat Rate products.  It’s been clear since the beginning that VPOs would sell Forever stamps and flat-rate boxes, but that is hardly “a wide range of products,” and this is why the PRC determined that VPOs should not serve as replacements for post offices.  It’s surprising to read that VPOs also have PO boxes, since that was not part of the original plan.  The Postal Service hasn’t said how many VPOs actually do have PO boxes.  Perhaps the PRC will ask about that.

It appears that some VPOs have already closed.  Nine VPOs that were on a list from September 30, 2012, aren’t on the current list.  (The list of nine is here.)

There may have been more closures.  Several dozen VPOs on the current list on USPS.com do not appear on the USPS.com Find Locations page.  That may be because the Locations website hasn’t been updated recently, but there are a couple of dozen VPOs that were opened last summer or even earlier and these should be showing up on Find Locations.  A list of these VPOs is here.  If it turns out that they too have closed, it would be helpful to know why.

The Postal Service hasn’t made VPO revenue data public, and it’s not likely to do so, but one can make some rough estimates.  Three out of four VPOs are in POStPlan communities where the average revenue for the post office is around $55,000.  If, say, 10 percent of the post office’s revenues are migrating to the VPO, a typical VPO might be bringing in around $5,000 a year.  The Postal Service pays the retail merchant $2,000 a year to run a VPO, so the Postal Service may get around $3,000 a year.

At that rate, four hundred VPOs would bring in $1.2 million a year — a tiny fraction of one percent of the Postal Service’s annual revenues of $65 billion.  Plus, this is not even new revenue; it’s just money that would have come into the system at the regular post office.

VPOs are obviously not a significant source of postal revenues, and they were never intended to be.  They were supposed to be a way for the Postal Service to close thousands of small rural post offices while still fulfilling the universal service obligation.  But the PRC has advised the Postal Service that given their limited offerings, VPOs could serve as supplements but not replacements for post offices.  It’s not clear why the Postal Service persists in developing them at this point.

Perhaps postal leaders think that sometime down the road they will be able to replace post offices with VPOs, as originally planned.  Or perhaps VPOs are a way for management to show that it’s at least trying to privatize the retail network the way other countries have done.  But the only way that could really happen here is by putting postal counters in thousands of big box stores like Staples and Wal-Mart and by franchising retail outlets the way UPS does with its UPS stores.

 

Other alternative channels

In addition to CPUs and VPOs, the Postal Service has been developing a variety of alternatives to post offices.  All of these “alternate access choices” are described in the Postal Service’s Annual Report every year; the 2010 report has a good description of each channel.  They include the following:

PC Postage: Buying stamps online is one of the most successful alternatives to the brick-and-mortar post office.  Revenues in 2013 were up 20 percent over 2012, compared to an increase of 4 percent the year before.  Small businesses are taking full advantage of the convenience and lower costs associated with using their computer to do postal business.  As noted above, however, those who buy postage online still need to go to the post office to do their mailing.

Retail partners: There are more than 64,500 retail partner locations at 650 partner companies selling stamps on consignment through the Stamps to Go (StG) program.  That’s up from about 53,200 locations in 2008.  Now more than 15 percent of all stamps are currently being sold through this program.  The Postal Service constantly mentions these retail partners — a list of nearby partners is always included when the Postal Service wants to close a post office, for example — and the default position for a search on the USPS Find Locations page includes these partners.  Despite such efforts, revenue from the retail partners in 2013 was down almost 5 percent.

Approved shippers: There are about 5,700 members in the Approved Shipper program, up from 4,000 in 2012 and 1,900 in 2008. (The numbers are from a GAO report and the 10-K report for 2013).  Approved shippers are independent shipping and mailing companies that offer services from USPS, FedEx, UPS, and whomever they want.  For the Postal Service, they offer Express and Priority Mail, Parcel Post, International Mail, Certified and Delivery Confirmation and Return Receipt.  The Postal Service doesn’t compensate the shipper, but there are no restrictions on additional fees that can be charged for mailings.  The revenue from approved shippers is presumably included in the “other” category in the revenue table above; as you can see, this category provides less than one percent of total retail revenues.

Kiosks: There are 2,760 self-service kiosks located in post offices to help when the lines are long.  In FY 2013, the Postal Service added kiosks at 132 locations, and it has added 84 more in FY 2014 so far.  According to the 2010 ACDR, there were 2,500 such kiosks around three years ago, and according to a GAO report, that’s about how many there were in 2008.  The number of kiosks hasn’t grown very significantly, and revenue from kiosks is down 8 percent.  It doesn’t look as if they are the wave of the future.

For the time being anyway, the alternative retail channels aren’t adding up to a significant alternative to the good old-fashioned brick-and-mortar post office.   That’s something to keep in mind next time the Postal Service justifies closing a post office or reducing its hours or relocating to a smaller space by saying that people aren’t mailing like they used to.

Maybe not, but they still depend on the post office.  The GAO, the big mailers, the privatization advocates, and the Postal Service would like to think that post offices are going the way of the Pony Express, but it’s not happening.  Average customers just aren’t buying the alternatives.

(Image credits: GAO reportVPO)

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