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Gabe Zichermann

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Fixing the United States Postal Service

Posted: 12/18/11 10:20 PM ET

The United States Postal Service is in trouble. Severe financial problems are looming due to pension funding issues and structural changes in the economy that move us away from physical mail. While I'd love to see a political change to the former, the latter seems inexorable. It's not so much that we are moving less stuff through the "mail" (though the decline of first class postage is well-documented), quite the contrary: shipments of packages to people's homes are at an all-time high. The real structural problem at the USPS is that the margins on physical goods transportation are in precipitous decline.

Consider this simple example:

  • A 1 oz. First Class Letter from NYC to San Francisco costs 0.44
  • A 5 lb. Fedex Ground Shipment costs 12.47 (before discounts) -- or 0.15/oz. -- with an actual time commitment, including tracking.
  • A 5 lb. USPS Medium Priority Mail Box --10.50 plus extras (but weight can go up to 15 lbs easily) -- from 0.04/oz.

There are clearly many factors that go into the cost of shipping a package or a letter. But the last time a first class letter was $.15/oz was in 1978 -- and that $0.15 in 1978 actually buys you nearly $0.45 worth of goods today. In fact, it has never been cheaper to move goods around the United States than it is today -- thanks to technology, innovation and infrastructure developed in the public and private sectors.

So the USPS has always been able to extract a heavy premium for its "mail service" throughout the history of the organization, whether through monopolistic or simple demand-supply practices. Now, this lucrative channel (both first class and bulk mail can be seen through a similar lens) is dying -- squeezed at the top by express delivery and email and at the bottom by email and courier services.


The USPS is -- in other words -- the middle market company, trying to milk its cash cows while significant innovation disrupts the landscape. But while I don't normally get nostalgic about a service like the post office, I do think there are still a wide range of interesting things that the USPS can do to turn itself around. Here then are a few simple -- though by no means comprehensive -- ideas:

Go Digital, Make Money

If you've ever tried to use a digital mail service like Earth Class Mail (whom I adore), or you've had a postal box, you know how hard the post office makes it to divert your mail to another location (think: notarized forms in duplicate, etc). Why not buy Earth Class Mail itself or launch a USPS-branded mail scanning and forwarding service? After all, if less actual mail is ultimately delivered, it saves on headcount costs in the medium term, helps the environment and puts the organization into the "digital mail stream" of the future.

Raise the Price of Stamps to $1

Smaller countries like Norway, Israel, Japan and Denmark price domestic postage near $1 per letter, and even poor nations like Mexico charge more (in USD terms) to mail a letter than we do. Although it might cause some sticker shock and is likely to push some marginal mail to the Internet, first class mail pricing should reflect what it's become -- largely a luxury or administrative requirement rather than a necessary feature of daily life. If we start seeing it as the optional service it is, we can start pricing it accordingly.

Let Everyone Print Postage Easily

Right now, printing your own postage is convoluted, expensive and cumbersome, requiring a subscription service (at or above $20/month base) and/or specialized equipment. Worse yet, the alternative is to go into one of the nation's dwindling post offices yourself, line up and shop. But what if printing a stamp was as easy as buying an app on iTunes? Why not let everyone setup an account that generates a unique 2D barcode instead of requiring stamps? Record the number of scans made and bill folks at the end of the month. Heck, you can probably even do it through iTunes itself, and validate the mail by scanning each piece as it passes by. Regardless -- reducing the friction to use stamps is sure to raise their utilization.

Make Mail Fun

While you're at it, why not expand people's ability to make and use custom stamps? The USPS could use crowd games and gamification to encourage more consumer participation in stamp and philately design/production, and possibly even use the techniques to reduce junk mail and peer-to-peer postal delivery. They have long been innovators at the use of surveys to pick specific stamps, but there's so much more potential here.

On a different (but similar) tack: imagine earning status or benefits for helping to distribute the mail in your building or block, or by being the person who receives packages in your local area for your neighbors. It sounds crazy, but monetizing unused resources and engaging communities with game-like mechanics works for startups like AirBnB, RelayRides and GetAround -- and it can work for the post office too. In fact, this happens informally in many neighborhoods (including mine in Harlem) -- and I think that a gamified community layer could be extraordinarily powerful.

In short, the USPS has tremendous potential to innovate itself out of the hole it's in. Whether it's fixing the UI/UX problems of the post office (both online and off), or engaging communities and resetting pricing, there are myriad options at their disposal today. Why oversee the demise of postal delivery when you can reinvent the organization for the future? That's a question I think USPS executives -- and the 300 million plus customers they serve -- should clearly be asking.

 

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