Snail Mail II: Implications

Yesterday, I gathered some statistics about snail mail, without comment, because I do have a day job, believe it or not. Today, I consider what it all means.

I started looking at the numbers as a result of posts by Markos about catalogs and phone books. The U.S. Postal Service claims that junk mail isn't subsidized by, nor does it subsidize, first class mail.

This would seeem to imply that simply eliminating junk mail wouldn't cause the cost of individualized mail to sky rocket. But, that isn't the case. Advertising mail makes up 42% of all mail. Another 21% of mail is presorted first class mail -- some of which is advertising mail, but much of which consists simply of more expensive advertising.

Mass mailers, both advertisers and huge operations that presort large quantities of individualized business mail like card card bills and utility bills, are actually quite a bit less resource intensive than ordinary letters. It isn't simply a matter of unionization or the lack thereof either. Most of their mailers print the materials they want to deliver locally, near the post office mail handling facilities where they will be dispatched to carriers, in pre-sort order in the first place, so that no one actually has to engage in the sorting process of turning a disordered stack of materials into an ordered one.

Most of the catalogs and fliers you receive in your mailbox in Denver from East and West Coast retailers were probably printed somewhere in the I-25 corridor from computer delivered copy, in sort order, and delivered directly from the printing press to a mail handling facility in your zip code. Also, unlike first class mail, a catalog or junk mail piece delivered to the wrong address doesn't have to be forwarded or returned to sender, which saves the postal service considerable costs.

Essentially the only cost that junk mailers receive from the U.S. Postal Service, and the only one that they pay for, is to have their materials carried by a letter carrier from a mail handling facility to your mailbox, as part of a large, consolidated mail stream. While the simple rate structure isn't very nuanced about it, the goal of "no subsidy" rate structure is for each piece of mail bears roughly its share of the letter carrier's delivery costs, based on its share of the burden it imposes on the letter carrier's total bag of mail.

But, the cost of having a letter carrier deliver whatever is in the mail stream to all the mailboxes in that carrier's territory (an average of about 550 homes and 100 businesses each), is quite indifferent to home much mail goes into the sack. If there were half as much mail in the system, it would be possible to make carrier routes a little larger, but not anywhere near twice as large.

The profitability of mail routes is largely not a function of differences in costs between routes, but of differences in mail volume. The cost of mail delivery is surprisingly insensitive to cost cutting measures. Reducing service from six days a week to one day a week would reduce postal system costs by only about 15%. Closing the least busy 70% of all post offices would reduce postal service costs by only about 1%. Ending delivery to all of the unprofitable routes in the nation, almost half of them, would reduce costs by only about 4%. Requiring mailboxes to be at the street, rather than on your porch, would save less than a penny a stamp.

Since costs are similar for each route, the differences in profitability mostly come from mail volume. Without junk mail, a first class letter would cost considerable more than it does. It would probably cost something on the order of 50% to 100% more per letter to make the post office break even.

Areas that private industry has nudged into, like parcel delivery, where the postal service competes with companies like DHL, UPS and FedEx, are an insignificant 1% of mail volume, even though the postal service retains a reasonably large market share of the parcel delivery business.

Of course, private courier services are the least of the postal system's worries.

Most people don't want 41 pounds of junk mail a year, any more than they want telemarketing calls or spam. People increasingly find it an annoyance. If they want a product, they will seek out a website, review the information that would be found in a catalog there, and order it online.

Businesses as big as the phone company, and as small as my two person law firm, are starting to send a large share of their invoices by e-mail. Many businesses direct deposit paychecks. Many households now have routine bills like the phone bill and the mortgage set up to be paid electronically, automatically. Law firms now e-file what they once mailed to opposing counsel and the courts. The lobby of the clerk's office at the U.S. District Court for the District of Colorado in Denver, where e-filing is mandatory, is almost always empty. Banks process checks electronically, rather than physically transporting them. Business to business mail is falling more rapidly than any other kind of mail. Deals that require an exchange of signatures are routinely done by fax or by e-mailing scanned pdf copies of signed documents.

Personal letters make up 7% of the mail stream, and have to compete with e-mail, titter and text messaging.

The persistence of junk mail has masked and buffered the general trend. But, a simple, common sense reform, that may on the balance actually make good ecological and societal sense, like a widely adopted no junk mail list, is all it would take to force the postal service to radically change its business model, greatly increase the cost of sending each letter, and in turn, continue the vicious cycle of declining mail volume.