5 ms·

Do you have a source on that? I've always heard the opposite, that we subsidize the junk mailers.

jessaustin 12y ago
Well, we pay them our time and attention, but the system wouldn't work if its biggest service operated at a loss: http://www.nytimes.com/2012/09/20/business/seeking-revenue-postal-service-plans-to-deliver-more-junk-mail.html http://www.nytimes.com/2012/09/20/business/seeking-revenue-p...
- samolang 12y ago
  That article states that 48% of all mail, or 84B pieces, is junk mail and corresponds to $17B in revenue (works out to 20 cents a piece). Seems to indicate that most revenue comes from non-junk mail. Also, it states nothing about profitability. The USPS as a whole operates at a loss, why couldn't junk mailing be operating at a loss?
  - pessimizer 12y ago
    >The USPS as a whole operates at a loss, why couldn't junk mailing be operating at a loss? Because there's no earthly reason to take a loss on advertising? What you're not accounting for here is the cost to pick up individual envelopes from your house, and the cost of dropping a presorted bundle shipped to the BMC into the truck.
    - makomk 12y ago
      Much of how the USPS operates, including how much they charge and what services they offer to other businesses, is mandated by Congress. They don't have any choice.
      - frankus 12y ago
        And much of what congress mandates is purchased by the junk mailers.
  - opendais 12y ago
    The reason the USPS operates at a loss is a combination of core inefficiencies that have nothing to do with the product [e.g. They trust their largest mailers to pay them accurately then threaten them with fines, rather than calculating the amounts at the start. The requirement to deliver to unprofitable rural addresses].
pessimizer 12y ago
Actually worked in the field for a couple of years, starting off addressing and sorting mail, and working my way up to being an intermediary between logistics and USPS:)
opendais 12y ago
That is incorrect. http://online.wsj.com/news/articles/SB10001424052970204612504576606743516301586 http://online.wsj.com/news/articles/SB1000142405297020461250... "Overall, the postal service says it makes money on advertising mail—but it could make more." The only category of mail it loses money on is things like Magazines & Catalogs which are not 'junk mail'. However, it isn't like an Ad Company complaining about AdBlock...standard mail: "The postal service said in fiscal 2010 standard mail covered nearly one and a half times its cost." People complain about the advertising mail because it is cheaper...but it is cheaper since they don't have to sort it, send it to specific, individuals, etc. The cheap price is due to the underlying costs for the USPS being different. Sorting mail and collecting it on an individual basis [rather than in bulk and being delivered] is not magically free somehow.
- samolang 12y ago
  "Contributing to the agency's record $8.5 billion shortfall in fiscal year 2010 was a loss of $1.7 billion on several mail products that didn't cover costs, including advertising-mail flat packages—typically catalogs—advertising-mail parcels, and the separate category of periodicals, according to the Postal Regulatory Commission." "The postal service said in fiscal 2010 standard mail covered nearly one and a half times its cost ... Advertising mail had higher volumes but brought in $17.3 billion, or only 26% of total revenue, due to hefty discounts and lower rates." So only a few types of mail generate a loss, and it is a loss of $1.7B, and advertising mail generates a profit of $5.7B, yet as a whole USPS operates at a loss of $8.5B. This doesn't leave me with much faith in their self-assessment of the profitability of specific types of mail.
  - opendais 12y ago
    The USPS's profitability problems are purely political and a few process issues. [e.g. The asking people to pay their rate, rather than billing which reverses the normal method of a transaction] This doesn't include forced money losers as well created by government controls on the USPS [e.g. rural delivery that loses money regardless of what is being delivered and the private corporations refuse to engage in it but instead hand it off to the USPS for the last mile in many cases]. The sad fact is, if the USPS had a level playing field with UPS or Fedex, it would be profitable as soon as the process changes, etc could be put in place. It isn't allowed to do that. http://www.fool.com/investing/general/2013/03/04/how-the-postal-service-is-being-gutted.aspx http://www.fool.com/investing/general/2013/03/04/how-the-pos... "That 75-year pre-funding mandate adds substantially to the post office's losses. This is a requirement that no other government agency, let alone a private company, must face. In short, the USPS is paying for people who aren't even employees yet -- in fact, may not even be born yet! And the USPS has been a model for prudent squirreling. As of Feb. 2012, it had more than $326 billion in assets in its retirement fund, good for covering 91% of future pension and health-care liabilities. In fact, on its pensions, the USPS is more than 100% funded, compared to 42% at the government and 80% at the average Fortune 1000 company. In health-care pre-funding, the USPS stands at 49%, which sounds not so good until you understand that the government doesn't pre-fund at all and that just 38% of Fortune 1000 companies do, at just a median 37% rate. The USPS does better than almost everyone." Why can't they just raise rates to make postage profitable in the 'bad' categories things: "Now, admittedly just raising postage is an overly simplistic solution, but it gets to a basic truth: lack of sales. Rates are overseen by the Postal Regulatory Commission (PRC), and prices must not rise faster than inflation. A postage stamp has increased just 12% in six years. That's another way that the USPS's mandate to operate like a business is stymied by overseers. Another major type of mail, bulk rate (ads), receives big discounts in exchange for pre-sorting mail, and could withstand higher postage, since they receive much more value than what USPS saves from pre-sorting. Fix: Allow USPS to price correctly. ... The effects are huge -- costing USPS billions. And new services, it's estimated, could increase sales by nearly $10 billion annually, potentially covering the earnings gap. But Congress would have to agree to those changes after already tolling the USPS bell. In its latest annual report, USPS begs Congress, in the most obsequious bureaucratese possible, to let it raise revenue. The odds look slim." Other ways they are hamstrung to generate more business: And when USPS tried to take advantage of web shopping? As Elaine Kamarck at Harvard's Kennedy School of Government explains. "But parcel shipments were generated by large organizations and the USPS was not allowed to negotiate discounts and thus lost business. It was forbidden by law from lowering prices to get more business. This resulted in the entirely incredible situation in the 1990s where the United States government negotiated an agreement for the delivery of U.S. government package services with Fed Ex because the USPS was not allowed to negotiate for lower prices!"
ghaff 12y ago
Like anything along these lines, you can construct a lot of different narratives. Most USPS revenue does come from First Class mail (though it's declining). Furthermore, "standard" mail seems to have a smaller contribution to profits than it does to revenue. http://about.usps.com/news/national-releases/2012/pr12_0217profitability.pdf http://about.usps.com/news/national-releases/2012/pr12_0217p... However, allocating costs is a cost accounting exercise that depends partly on how you treat fixed costs. If you assume that most of the costs associated with first class mail are going to happen anyway, then everything you get from standard mail is pure gravy. Of course, there are some costs associated with actually delivering junk mail (and periodicals) but it probably doesn't have a huge effect on how many post offices you have, existing pension benefits, and so forth. In fact, according to the prior link: "Labor costs, which are approximately 80% of total costs, create a fixed cost structure which is not readily scalable in response to changes in volume and revenue."
- samolang 12y ago
  Yes, I understand all this which is why I was hoping there was a good study or something done on the matter. Junk mail accounts for 48% of all mail volume, but only 26% of revenue. What would be the effect of increasing the cost of junk mail until its volume decreased by half? You'd see a 24% decrease in mail volume, but less than a 13% decrease in revenue. Would this decrease in volume facilitate cutting "fixed costs" like labor? Or are the costs truly fixed? If so, is that for business reasons or due to congressional mandates or what?

Well, we pay them our time and attention, but the system wouldn't work if its biggest service operated at a loss: http://www.nytimes.com/2012/09/20/business/seeking-revenue-postal-service-plans-to-deliver-more-junk-mail.html http://www.nytimes.com/2012/09/20/business/seeking-revenue-p...

samolang 12y ago
That article states that 48% of all mail, or 84B pieces, is junk mail and corresponds to $17B in revenue (works out to 20 cents a piece). Seems to indicate that most revenue comes from non-junk mail. Also, it states nothing about profitability. The USPS as a whole operates at a loss, why couldn't junk mailing be operating at a loss?
- pessimizer 12y ago
  >The USPS as a whole operates at a loss, why couldn't junk mailing be operating at a loss? Because there's no earthly reason to take a loss on advertising? What you're not accounting for here is the cost to pick up individual envelopes from your house, and the cost of dropping a presorted bundle shipped to the BMC into the truck.
  - makomk 12y ago
    Much of how the USPS operates, including how much they charge and what services they offer to other businesses, is mandated by Congress. They don't have any choice.
    - frankus 12y ago
      And much of what congress mandates is purchased by the junk mailers.
- opendais 12y ago
  The reason the USPS operates at a loss is a combination of core inefficiencies that have nothing to do with the product [e.g. They trust their largest mailers to pay them accurately then threaten them with fines, rather than calculating the amounts at the start. The requirement to deliver to unprofitable rural addresses].

pessimizer 12y ago

Actually worked in the field for a couple of years, starting off addressing and sorting mail, and working my way up to being an intermediary between logistics and USPS:)

opendais 12y ago

That is incorrect. http://online.wsj.com/news/articles/SB10001424052970204612504576606743516301586 http://online.wsj.com/news/articles/SB1000142405297020461250... "Overall, the postal service says it makes money on advertising mail—but it could make more." The only category of mail it loses money on is things like Magazines & Catalogs which are not 'junk mail'. However, it isn't like an Ad Company complaining about AdBlock...standard mail: "The postal service said in fiscal 2010 standard mail covered nearly one and a half times its cost." People complain about the advertising mail because it is cheaper...but it is cheaper since they don't have to sort it, send it to specific, individuals, etc. The cheap price is due to the underlying costs for the USPS being different. Sorting mail and collecting it on an individual basis [rather than in bulk and being delivered] is not magically free somehow.

samolang 12y ago
"Contributing to the agency's record $8.5 billion shortfall in fiscal year 2010 was a loss of $1.7 billion on several mail products that didn't cover costs, including advertising-mail flat packages—typically catalogs—advertising-mail parcels, and the separate category of periodicals, according to the Postal Regulatory Commission." "The postal service said in fiscal 2010 standard mail covered nearly one and a half times its cost ... Advertising mail had higher volumes but brought in $17.3 billion, or only 26% of total revenue, due to hefty discounts and lower rates." So only a few types of mail generate a loss, and it is a loss of $1.7B, and advertising mail generates a profit of $5.7B, yet as a whole USPS operates at a loss of $8.5B. This doesn't leave me with much faith in their self-assessment of the profitability of specific types of mail.
- opendais 12y ago
  The USPS's profitability problems are purely political and a few process issues. [e.g. The asking people to pay their rate, rather than billing which reverses the normal method of a transaction] This doesn't include forced money losers as well created by government controls on the USPS [e.g. rural delivery that loses money regardless of what is being delivered and the private corporations refuse to engage in it but instead hand it off to the USPS for the last mile in many cases]. The sad fact is, if the USPS had a level playing field with UPS or Fedex, it would be profitable as soon as the process changes, etc could be put in place. It isn't allowed to do that. http://www.fool.com/investing/general/2013/03/04/how-the-postal-service-is-being-gutted.aspx http://www.fool.com/investing/general/2013/03/04/how-the-pos... "That 75-year pre-funding mandate adds substantially to the post office's losses. This is a requirement that no other government agency, let alone a private company, must face. In short, the USPS is paying for people who aren't even employees yet -- in fact, may not even be born yet! And the USPS has been a model for prudent squirreling. As of Feb. 2012, it had more than $326 billion in assets in its retirement fund, good for covering 91% of future pension and health-care liabilities. In fact, on its pensions, the USPS is more than 100% funded, compared to 42% at the government and 80% at the average Fortune 1000 company. In health-care pre-funding, the USPS stands at 49%, which sounds not so good until you understand that the government doesn't pre-fund at all and that just 38% of Fortune 1000 companies do, at just a median 37% rate. The USPS does better than almost everyone." Why can't they just raise rates to make postage profitable in the 'bad' categories things: "Now, admittedly just raising postage is an overly simplistic solution, but it gets to a basic truth: lack of sales. Rates are overseen by the Postal Regulatory Commission (PRC), and prices must not rise faster than inflation. A postage stamp has increased just 12% in six years. That's another way that the USPS's mandate to operate like a business is stymied by overseers. Another major type of mail, bulk rate (ads), receives big discounts in exchange for pre-sorting mail, and could withstand higher postage, since they receive much more value than what USPS saves from pre-sorting. Fix: Allow USPS to price correctly. ... The effects are huge -- costing USPS billions. And new services, it's estimated, could increase sales by nearly $10 billion annually, potentially covering the earnings gap. But Congress would have to agree to those changes after already tolling the USPS bell. In its latest annual report, USPS begs Congress, in the most obsequious bureaucratese possible, to let it raise revenue. The odds look slim." Other ways they are hamstrung to generate more business: And when USPS tried to take advantage of web shopping? As Elaine Kamarck at Harvard's Kennedy School of Government explains. "But parcel shipments were generated by large organizations and the USPS was not allowed to negotiate discounts and thus lost business. It was forbidden by law from lowering prices to get more business. This resulted in the entirely incredible situation in the 1990s where the United States government negotiated an agreement for the delivery of U.S. government package services with Fed Ex because the USPS was not allowed to negotiate for lower prices!"

ghaff 12y ago

Like anything along these lines, you can construct a lot of different narratives. Most USPS revenue does come from First Class mail (though it's declining). Furthermore, "standard" mail seems to have a smaller contribution to profits than it does to revenue. http://about.usps.com/news/national-releases/2012/pr12_0217profitability.pdf http://about.usps.com/news/national-releases/2012/pr12_0217p... However, allocating costs is a cost accounting exercise that depends partly on how you treat fixed costs. If you assume that most of the costs associated with first class mail are going to happen anyway, then everything you get from standard mail is pure gravy. Of course, there are some costs associated with actually delivering junk mail (and periodicals) but it probably doesn't have a huge effect on how many post offices you have, existing pension benefits, and so forth. In fact, according to the prior link: "Labor costs, which are approximately 80% of total costs, create a fixed cost structure which is not readily scalable in response to changes in volume and revenue."

samolang 12y ago
Yes, I understand all this which is why I was hoping there was a good study or something done on the matter. Junk mail accounts for 48% of all mail volume, but only 26% of revenue. What would be the effect of increasing the cost of junk mail until its volume decreased by half? You'd see a 24% decrease in mail volume, but less than a 13% decrease in revenue. Would this decrease in volume facilitate cutting "fixed costs" like labor? Or are the costs truly fixed? If so, is that for business reasons or due to congressional mandates or what?