Currently there is a major argument in Congress and before the Postal Regulatory Commission about how and where the Postal Service should be able to close Post Offices. In both cases, the conflict focuses on retail facilities owned by the Postal Service that employ postal employees. In neither case, has any party raised the question as to what the Postal Service’s retail strategy should be and what would it take to create a retail infrastructure that makes sense for needs of the Postal Service’s customers over the next decade.
The Postal Service’s Retail Strategy is What a Government Facing Declining Tax Revenue Would Do
Over the past few years the Postal Service retail strategy has appeared to focus on reducing access to retail services. A deliberate strategy to reduce access is implied by 1) reductions in hours that Post Offices are open; 2) the large number of retail facilities that are subject to a closure; and 3) an ineffective implentation of limited service “Village Post Offices.” The appearance of a strategy focussed on limiting retail access focuses political attention on slowing down and/or reducing the loss of retail access.
The Postal Service’s implied retail strategy suggests that the Postal Service manages its service to retail customers in a manner consistent with how city governments manage services when tax revenues decline. For example, if a city council cuts a library budget to reflect lower tax revenue, the library system has little choice but to close libraries and/or shorten hours as way to meet its budget. Decisions about which library to close or how hours should be shortened is often decided by a vote of the council that has to approve the decisions of the library board.
- Source: Post and Parcel
The Retail Strategy of a For Profit Privatized Post
A recent story in Post and Parcel on PostNL illustrated what a postal retail strategy would look like for a postal entity operating under a standard business model and a clear universal-retail-access obligation. PostNL now has 2,600 retail outlets in the Netherlands, with most of the outlets located in retail locations like supermarkets that people go to at least two or three times a week.
To put PostNL’s retail strategy in context, Post NL’s outlets in the Netherlands serve a territory about twice as large as New Jersey with a population that is slightly less. Currently, the Postal Service has 498 Post Offices listed in the state of New Jersey. The Postal Service has the equivalent of 62% fewer identifiable retail outlets in New Jersey than PostNL would put in the state.
Postal Service’s Use of Non-corporate Locations is Inadequate to Meet Customer Needs
While the Postal Service has an extensive network of consignment outlets that sell stamp booklets, the consignment network only sells postage for the Postal Service’s fastest declining product. Over time these outlets may look at selling stamps the way they look at selling canned vegetables. They are selling a product that has declining customer demand so the retailer continues to offer the product but continually reduces shelf space and promotional dollars.
The real problem with its retail strategy relates to the limited access that consumers and small businesses have to the full range of Postal Service’s services and products. Even with its efforts to put Priority Mail and Express Mail in retail outlets, the access to the Postal Services products is significantly less than at PostNL, and, for that matter, most liberalized national posts worldwide. Even more importantly, visiting outlets that sell both services offered by the Postal Service and its competitors, the Postal Service’s products are provided as a second or third option as other carriers offer both a broader product line, and greater marketing and operating support than the Postal Service.
Current Legislative Proposals Don’t Change the Postal Service’s Ability to Serve Retail Customers
Four drivers appear to shape legislation on postal retail strategy.
- Access to a Post Office is a government service. Therefore the amount of retail access the Postal Service provides is based on its impact on the total costs. This is no different than services provided by any other government department. Therefore, the amount of access is determined by a budget and reductions in revenue must result in either fewer outlets or fewer hours open.
- Access to retail services not provided in a corporate office is significantly inferior. This driver reflects the failure of the Postal Service’s to offer a functioning, multi-channel, brick-and-mortar retail strategy for offering all retail services that it is legally permitted to offer.
- The Postal Service is incapable of implementing a strategy of installing non-corporate retail outlets that can offer a full range of Postal Service in a manner similar to national posts outside of the United States.
- Fear of abandonment encourages development of law and regulatory processes that slow or stop changes to the retail network. The emotions and political reactions generated by the loss of a Post Office are no different than what happens when a city plans to close a library or recreation center or a school district closes a neighborhood school. So far legislative proposals reflect govenmental solutions designed to limit the power of budget-related objectives in developing a retail access strategy
These drivers will not produce changes to the long-term trend in Postal Service retail service. The Postal Service will likely provide diminished retail service and have a higher cost of providing universal retail access than if the alternative legislative approach described below is implemented. In particular, the legislative solutions that limit the ability of the Postal Service to close Post Offices meet a short-term political need and do little to ensure quality retail services in either the communities that see their Post Offices saved or in communities with Post Offices under review. Restricting the ability of the Postal Service to close Post Offices will intensify pressure on the Postal Service to cut hours and/or staffing levels, if closing Post Offices is taken off the table.
Legislative Approach That Can Provide a Customer Focused Approach to Providing Universal Retail Access
Fixing the retail access issue requires two changes from the current approaches now on the table.
First, legislation should set rules for a required level of universal service for retail access without setting rules on how that retail access must be provided. This is the approach used in nearly all liberalized Posts. If alternatives to corporate offices are more cost-effective they will be used; if not, then corporate offices will remain. Forcing corporate offices to close to meet a cost-saving target or requiring them stay open create management restrictions will likely result in a less efficient, less consumer-friendly retail solution that a well-crafted, universal-retail-access obligation requirement would provide.
Second, legislation must put the Postal Service under a corporate model, operating with standard business objectives. Without replacing the current model with a corporate model, decisions on retail access will primarily reflect incentives found in a government budgeting process and not the incentives that reflect the need to serve customer needs.
Postal reform that includes a service-related access obligation and a corporate business model is the common approach in postal reform outside of the United States. Under this type of reform, Australia Post, Canada Post, Post NL now provide their retail customers in urban and rural communities with access that exceeds the minimum standards set in each country’s universal service obligation, as well as the retail access provided by the Postal Service.
It’s time for Congress to focus on ensuring universal retail access and develop legislation that follows approaches that have ensured that access obligations are met or exceeded. Since legislation appears unlikely in the 112th Congress, postal stakeholders, urban and rural communities will likely revisit this issue at least one more time before the decade is out.
This blog has previously presented the retail access requirements that are part of Canada Post’s and Australia Post’s universal service obligation. For more information, see the following posts.
Why Australia Post Succeds in Retail
Room for Compromise on Rural Retail Postal Services
Australia Post Retail Strategy
Ensuring Access to Retail Services: Defining Effecting Access
