Post Offices are Running out of Mail!

By Martin Sarch and Frank Cianciullo

Post Offices in North America, and likely much of the Western world, will run out of mail in the next 20 – 25 years. Posts that may survive will be those that can make the paradigm shift, which could include reimagining their organization from a letter-delivery company to a parcel-export, parcel-delivery and local-to-local courier/logistics company that also provides services that support the community’s ability to thrive and build a sustainable future.

The facts and the numbers are fully evident and don’t lie. Senator Bernie Sanders said, “As a result of the digital age and the decline of first-class mail, there is no question that the Postal Service must change and develop a new business model.”

Looking at the 10-year trend for the United States Post Office (USPS) and The Canada Post Corporation (CPC), 2012 to 2022, at straight-line volume decline, both Posts will run out of mail in the next 20 – 25 years. Moreover, given that technological change is accelerating exponentially, Posts may have even less time than expected to redefine their value.

Certainly, Posts will continue to own the rural space, but to keep it, they will have to regroup, rethink the value proposition/viability, and consider new services that people need and want and for which they are willing to pay. They will have to think out-of-the-box and consider agency services, banking and an array of financial services, government services and socio-economic development support, e-commerce, shipping, food security/agriculture support programs, health/wellness services, selling fast-moving consumer goods and solar products, offering recharging for electric vehicles, etc.

However, the urban challenge is a new ball game that Posts have not generally been good at. The next twenty years expect explosive growth in e-commerce, and it holds opportunities for Posts, but the parcel competition with DHL, FedEx, Amazon, UPS, Purolator, and so many other new players will be very fierce.

At this point, Amazon is the clear winner! You can watch the Amazon delivery vehicles that go down our street daily. They currently stop every fourth or fifth house. The density of delivery keeps costs low and increases profits. If you think Amazon is not thinking about adding the Courier business component now, think again!

The Amazon business model is to do everything at the lowest cost. Currently, many Amazon delivery and operations jobs pay low wages. They use independent / delivery contractors. Posts, many of which are unionized, pay fairly well. Posts must find different ways to compete, or they will fail.

Let’s face it. Posts are in this boat because they helped companies like Amazon and a myriad of mail consolidators steal their postal lunch (and build their own network) by offering reduced rates in exchange for higher volumes—just to fill the postal infrastructure capacity appetite….while telling small business owners and consumers to pay the full counter rates, which would top up the capacity and provide profit. What were they thinking?

Some Posts are now cutting their USOs and retreating!

Over the last 9 months, several large Posts worldwide have responded to the spiralling decline of mail by either eliminating the Universal Service Offering (USO) outright or cutting their USO to their customers. Of course, different Posts are at different points on the road. A number of large Posts are buying time by getting government subsidies, selling off properties, trying to cut costs, cutting service, charging rural customers higher rates than urban customers and trying to drive efficiencies with tighter KPIs, / metrics /ratios/optimization/automation / robotics, etc.

Business guru Tom Peters’ bestseller book, The Circle of Innovation: You Can't Shrink Your Way to Greatness, tells it all. Downsizing and reducing service is not a strategy for success. It’s short-termism, defensiveness, retreating and a very conservative / old-hat approach. Rather, Peters advocated dreaming big dreams – imagine growth, innovation, audacity, seizing opportunities and continually pushing new boundaries. Posts need a real, paradigm-shifting plan!

There is a better way. Start by asking yourself the tough questions!

To get shareholders to recognize and address the issue of declining mail volumes at USPS and Canada Post, these organizations need to begin a strategic communication and engagement plan. They need to admit to the people the truth that everyone knows already.

Before they proceed, they need a direction. They will need to develop a long-term plan, not five years or even 10, but at least a 20-year plan, to address the looming changes to the business.

Some of the questions that need to be discussed include the following:

• Does the Post Office need to continue to exist?
• Do we need to sell off noncore assets?
• Should there be separate rural/remote and urban companies?
• Should the rural/remote Post Office be absorbed into the Government structure?
• Could / should the Post Office itself or parts of it be sold off?
• How or even do we need to maintain any universal service?
• How will we manage the large staff and unions through the change?
• How will we engage all stakeholders, including consumers, businesses, small businesses, partners, shareholders, and rural customers?
• How will we level the playing field (cost and service) for businesses of every size?
• How will we manage Customs and international shipping?
• How can we work through this change with the Universal Postal Union (UPU) and other Posts?

Currently, the mail received is the straggling or remaining bills and invoices that have not yet gone online. Such senders are still trying to get people to go to online transactions. Every contact with their customers asks people to use online sources, from government at every level, to health care, utilities and sales of every type. As these disappear, the amount of mail will decline even more.

Whether Posts will admit or not, they are in dire straits! The first crucial step is to assess the financial situation comprehensively and create a crisis management plan. This plan needs to be made up of people with imagination and the ability to address the real truths - people who are not afraid to call it the way they see it and do not have their interests tied to short-term, annual salary bonuses.

Reimagine your Post for a new and tougher world!

The key next steps include:

1. Immediate short and long-term Financial Assessment

• Cash Flow Analysis: Evaluate current cash flow to understand the immediate liquidity position. Identify all sources of cash inflows and prioritize payments to maintain essential operations.
• Debt Obligations: Review all debt obligations.

2. Cost Control Measures

• Expense Reduction: Implement immediate cost-management measures. This could include reducing discretionary spending, freezing hiring, and cutting non-essential expenses. Since labour is the single largest Post Office expense, people planning will be essential.
• Operational Efficiency: Streamline operations to improve efficiency and reduce waste. Evaluate processes for potential automation and consolidation. Every Post believes it is efficient, but there are always opportunities.

3. Stakeholder Communication

• Transparency: Communicate openly with stakeholders, including employees, investors, suppliers, and customers, about the company’s situation and the steps to address it.
• Engagement: Engage key stakeholders in the turnaround plan to gain their support and cooperation.

4. Strategic Review

• Business Model Analysis: Review the business model to identify areas of strength and weakness. Consider if parts of the business need to be divested or if there are opportunities for pivots or innovations. They must indeed determine if there is a business model that will work.
• Market Positioning: Analyze market conditions and competitive positioning to identify potential opportunities for differentiation and growth.

5. Restructuring Plan

• Financial Restructuring: Develop a restructuring plan that includes reducing debt, improving capital structure, and potentially raising new capital.
• Operational Restructuring: Realign operational strategies to focus on core competencies and profitable business areas.

6. Leadership and Expertise

• Experienced Leadership: Ensure the leadership team has the experience, vision, skills and courage to navigate the crisis. This may involve bringing in turnaround specialists or consultants.
• Employee Morale: Maintain employee morale and productivity by being transparent, involving them in the turnaround process, and providing support where needed.

7. Implementation and Monitoring

• Action Plan: Develop a detailed action plan with clear timelines, responsibilities, and milestones.
• Monitoring and Adjustment: Regularly monitor progress against the plan and make adjustments as necessary based on ongoing performance and external conditions.

Posts can stabilize their financial situation by taking these steps, restoring stakeholder confidence and creating a foundation for recovery and long-term sustainability.

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Frank Cianciullo and Martin Sarch are postal specialists. Each of them has 30 years of hands-on experience, working at Canada Post. They have spent the last 10 years working with the UPU, CARICOM, the Caribbean Postal Union and postmasters of Caribbean Posts to “Dream Big Dreams” by reflecting, reimagining and resetting, so that their Posts can be all that they can be. They produce and distribute the monthly newsletter: Caribbean Postal Innovation.