How to Save the U.S. Postal Service

Digitalization may end up saving the USPS from extinction

For so long, the challenges facing the United States Postal Service (USPS) have perplexed thought leaders and politicians all over our country.  Year after year, the Postal Service loses billions of dollars, all while new technologies and new competitors continually enter the shipping and logistics market.  In fact, in 2010, the USPS projected it would lose over $200 billion over the next ten years[1].  Data shows that over the last two years, 2014 and 2015, the USPS has lost $5.5 billion and $5.1 billion, respectively[2].  Keep in mind that exacerbating these losses is the fact that the Postal Service receives no tax dollars for operating expenses and relies on the sale of postage, products, and services to fund its operations[3].  Many have called for the privatization of the Postal Service, but this would require bipartisan cooperation in Congress to sell off the country’s second largest employer during a period of (historically) higher unemployment in the United States.  All of this begs the question, how can we save the Postal Service?

The answer is a true commitment to a digital strategy that represents a full “transformation of mail” and monetizes other assets of the Postal Service.  Sure, USPS has used digital technologies to optimize their logistics network and delivery services, primarily for cost cutting, but there are attractive adjacencies available to the Postal Service that could put them back on track to profitability.  The proposed digital strategy contains several growth opportunities for the Postal Service: increasing the use of data to build a more data-rich environment for customers; accelerating the digitization of physical products; and speeding up digital transformation to optimize operations[4]. Megan Brennan, Postmaster General and CEO of the Postal Service, has introduced two specific digitalization initiatives that have gained significant traction during this past year.

The first initiative is a robust data and analytics platform called “Informed Visibility”.  This platform will aggregate and track data and analytics across the Postal Service’s supply chain and later monetize this data for private use.  In essence, the Postal Service will begin to offer commercial customers information that enables greater visibility associated with the “last mile” of delivery, one of the more challenging aspects of the supply chain.  With robust data, tracking, and analytics, commercial customers can better coordinate personalized mail to consumers and create omni-channel marketing campaigns that serve as a much more powerful marketing and communications tool.

The second innovation is a mobile application, Informed Delivery, that tracks and photographs letters, catalogs and packages and sends all of this data to users through periodic updates.  The USPS claims that Informed Delivery immediately increases the value of direct mail by doubling the number of impressions users see — one physical and one digital — that marketers will inevitably be able to use to better target their addressable market.  In 2016, the USPS did a roll-out of this application reaching approximately 67,000 users in New York and Virginia[5].  Results have shown that 70% of subscribers opened the application daily and that more than 90% percent of users read notifications four or more times a week[6].   The beauty of Informed Delivery is that it engages customers on a daily basis, all in real-time, which gives paying marketers another channel to reach consumers in every pocket of the U.S.  Given the success during beta testing, the USPS has plans to roll out Informed Delivery nationwide in 2017.

The real competitive advantage of the Postal Service is that it is the only organization that is embedded in every neighborhood in our country.  By adopting more digital solutions, the Postal Service has even more room to grow outside of its core service offering.  Three additional areas the Postal Service can emphasize (modeled after some foreign postal services in Switzerland, France, and Denmark) are the modernization of hybrid mail categories; the continuation of services related to electronic money transfers; and the introduction of a secure supply chain assurance platform based on existing the existing USPS digital infrastructure.  While the opportunities seem endless, the Postal Service faces a huge problem: the legal framework in the U.S. prevents it from entering into non-postal service offerings, forcing USPS to double down on its flawed core business.  So, in order to accelerate this digital transformation, it is time for reform if we hope to save our Postal Service.

(717 words)


[1] United States Postal Service. Ensuring a Viable Postal Service for America. March 2010.

[2] United States Postal Service 2014 and 2015 Annual Report to Congress. Postal Regulatory Commission.

[3] United States Postal Service. “U.S. Postmaster General Unveils Digital Strategy to Support Mailing Industry at National Postal Forum.”  Press Release March 21, 2016.

[4] United States Postal Service.  Riding the Waves of Postal Digital Innovation. July 20, 2016.

[5] Digital Marketing News Database.  March 22, 2016.

[6] Ibid.

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4 thoughts on “How to Save the U.S. Postal Service

  1. Thanks for the post.

    I wonder if there is an easier solution to close the financial gap – could USPS simply raise prices? Perhaps that solution is untenable politically, but it would seem that closing a $5bn+ annual gap will take quite a lot of time, effort, and resources. My personal experience has been that USPS is consistently cheaper than UPS and FedEx, and per the below article, it appears that is certainly the case.
    http://online-shipping-blog.endicia.com/fedex-ups-usps-cheapest-shipping-rates-comparison-chart-2016/

    Definitely agree that the digital improvements can help, as your post clearly states, but do you think they are truly enough?

  2. As the online retail industry keeps increasing the difficulty of fulfilling the customer expectations regarding delivery experience increases. One of the key elements of the new challenges is the logistics around the “last mile” delivery which now represent as much as 28% of the total delivery cost to a business putting a lot of pressure on the cost passed to the consumer and the bottom line of businesses. (1)
    By being USPS the service with the most footprint in the US, the idea of selling their data via “Informed Visibility” sounds like a great way to monetize information that is very difficult to obtain and gives so many competitive advantages for planning purposes to companies that can analyze it. However, I don’t see the proposed solutions as the key to a sustainable business.
    While some e-commerce players like Amazon are starting to have vertical integrations where they won’t depend on third parties’ delivery services, companies like USPS should reframe their value proposition to continue to be a solution provider for companies that can’t afford those kinds of integrations. In that line of though, USPS should reframe their operations in a way that they become a big player again on the segment, utilizing for internal purposes their valuable data and offer better services along the value chain.

    1. http://bringg.com/blog/insights/4-challenges-of-last-mile-delivery-for-ecommerce/

  3. Thanks for the article! I think that these digital initiatives sound promising, but I just wonder if the USPS will be able to get to breakeven based on these? To me, it seems like there are a whole host of problems that are burdening the USPS; in an age where UPS, FedEx and DHL are managing to succeed, why do we need the USPS? I understand that it’s a large US employer, but it appears that there are private companies that can do the USPS’ job much more efficiently than the USPS–as such, why waste government resources to support a company that is losing billions?

  4. Very interesting! Do you think USPS will be better positioned to make this transition to digital than other companies like FedEx? I believe the USPS fulfills a fundamental social role of connecting certain populations where traditional firms do not reach due to profitability concerns. I would presume that this explains a big part of the company’s loses. I’m skeptical that these two new business models will allow the company to recuperate profitability since it is far from their core business of delivering mail.

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