Checking the Mail

It has been a year filled with all manner of challenges, twists and turns for the mailing industry and the United States Postal Service. Not only a global pandemic, but, natural disasters, unemployment in the double digits, a new Postmaster General and a presidential election year. The perfect storm? 

The mailing industry has been hit especially hard in 2020. COVID-19 has brought with it reduced mail volume, delivery performance (USPS and other carrier performance) has been affected negatively, remote working employees has challenged many employers to pivot their service delivery models to support clients and manage their businesses. All this while being cognizant of their families’, friends’, clients’ and employees’ safety and health. The supply chains supporting our industry, the customers and clients generating the marketing mail volumes have also been impacted, and the ripple effects have been, in some circumstances, catastrophic. 

What has been extraordinarily amazing is watching the industry rise to the occasion together to support one and all to the extent possible with respect to business continuity, crisis management, innovation and ingenuity, to survive in our daily lives and across all businesses that represent this phenomenal industry in so many ways. 

Fortunately, the printing and mailing community was deemed essential very early on when the pandemic started. So many of our organizations were fortunate to be granted the opportunity to continue operating. This was not without challenges. Among them, the safety of employees reporting to work and having the necessary personal protective equipment (PPE) available. Sanitation protocols needed to be put in place and kept current as they changed with the data that was being collected. Social distancing was required, which led to reworking the layout of the operations supporting the business and the seemingly endless changes imposed.

The pandemic is still here, and unfortunately, COVID-19 positivity rates are presently rising at alarming rates. Our industry has experienced contraction, and this will continue. Unfortunately, the same is true for the businesses of the clients we serve. We have all learned how to “pivot” this year, and it will be an important skill to have and use as our clients and their non-existent advertising or marketing budgets continue to waver on what will happen in 2021 and beyond.

Postmaster General Louis DeJoy

During this global pandemic, a new PMG, Louis DeJoy, was selected and began his new job. 

Upon starting the job, DeJoy launched a series of changes and shake-ups including an entire overhaul of their organization alignment and leadership, eliminating areas, districts, and re-aligning all functional areas into a new reporting and operational structure. Among things particularly controversial, he issued directives to eliminate overtime, and adhere to all carrier and transportation schedules by leaving on time, regardless of all mail being ready and available for dispatch. As a part of these directives, no extra transportation would be allowed to meet service performance goals for any class of mail. Add in the expected high volume of election mail, and the optics were terrible regardless of the intent of the orders. The fear of delayed mail affecting the outcome of the 2020 presidential election caused a firestorm of bad press and public outrage. The USPS was a headline news story across the country for days for all the wrong reasons. Outcry from citizens and politicians about the possibility of a “fixed” election caused by mail delays was not a good way for DeJoy to start his postal career. 

DeJoy was called to testify in front of Senate Homeland Security and the Governmental Affairs Committee. Lawmakers from both parties and postal union leaders sounded alarms over procedural changes instituted by DeJoy this summer, including eliminating overtime and slowing some mail delivery. The postal union disputed eliminating sorting equipment, removal of collection boxes, reduction in retail window operations, with no “analysis” of the impact to service.  In fairness, these claims by the postal unions were politicized, as many of them predated DeJoy and were well underway for years prior to his taking the position of PMG. Additionally, the unions claimed his intent in doing this was an attempt to intentionally undermine Postal Service operations to sabotage mail-in voting in the November 2020 election. 

By the end of the very contentious hearings, DeJoy said in a statement, "To avoid even the appearance of any impact on election mail, I am suspending these initiatives until after the election is concluded."

Volume and Revenue

On Sept. 25, the USPS filed its August 2020 finances with the Postal Regulatory Commission. While the USPS continues to exceed revenue expectations with overall revenue up 4.2% over August 2019, their expenses declined 16% relative to last year, resulting in a net loss of $278 million. Last August's net loss was $1.7 billion. Financial problems continue with projections of the USPS being out of cash by the middle of 2021. One thing we all agree on is that this model is unsustainable for the long term, and we all need meaningful action to make it sustainable.

We have been hearing for years that meaningful legislation is necessary. This would result in some combination of overhauling the 2006 Postal Accountability and Enhancement Act and continued operational changes for the USPS. Nothing is easy but surely the legislators espousing about the USPS’ operational changes and the effects on the election should want to continue that work post-election season. Given the current political climate, we can remain hopeful but also aware that we should not expect impactful change in the foreseeable future. 

The pandemic has accelerated both the decline of letter volume and growth of e-commerce parcels due to an increased number of people shopping from home. Last-mile delivery companies have all scaled-up dramatically because of these volume increases. 

Volume has declined steadily since late March.

• Overall mail volume decline is easing, from a high around 25-30% to 15-20%.
• Parcel volume growth is easing.
• The week of Aug. 24 saw an overall decline of 15.5%. First-Class single-piece retail mail went down 16.6%, while presort commercial went down 3.9%.
• Periodicals are down 21.6%.
• Marketing mail is down 16.3%.
• Packages are up 35.6%.

Decline in mail volumes will continue.

• End-of-fiscal-year 2020 volume is trending to be 10-20% below SPLY.
• Return of volume not expected until FY 2022.
• Post-pandemic volume is initially projected to be 25% below pre-pandemic.

First-Class Mail

• There is a decline in single-piece mailing by individuals.
• There is a low proportion of discretionary mailings (recurring bills and statements).
• More are transitioning to electronic formats.

Periodicals

• Very little discretionary volume (samples, promotional)
• Scheduled distribution of subscriber/requester copies

Marketing Mail

• High proportion of discretionary volume
• Advertising tied to retail and consumer activity
• Promotions unnecessary due to the closing of many businesses (stores, restaurants, etc.)
• Nonprofit activity reflects ongoing/new need for donations.

Package Services/Competitive Services

• Parcel volume reflects loss of retail access.
• The permanence of an increase is uncertain if stores reopen.

Service Performance in 2020

Service impact began to be felt in PQ III (April-June) 2020 as discussed above. Even before the directives of the new PMG, the USPS was effectively managing an absenteeism rate 25% - 35% caused by the pandemic. Any reasonable person would expect this to dramatically affect service, and it has. The decline in service affected flats most dramatically and, as with mail in general, varied widely throughout the country by district. Since the Senate hearings, and the PMG vowing to suspend the initiatives discussed until after the election, the industry has seen an improvement in service.

The surge of election-related mail for this year’s elections across the country and many different political offices, especially in battleground states, has resulted in increased mail volume for the USPS, which decreases the overall lost volume for their FY20. The USPS has implemented “critical processing” of all election mail throughout their organization. This has led to improved service and delivery. 

 Key Facts

• 2.5 Days Average Delivery Time 
  Since Oct. 1, the average time of delivery for First-Class mail, including ballots, was 2.5 days with 97.5% of all measured First-Class mail delivered within five days across the country.
• 4.5 Billion Political and Election Mail pieces
  Total mail volume surpassed 4.5 billion mail pieces for both political and election mail tracked, representing an increase of 114% compared to the 2016 election cycle.
• 122 Million Ballots Processed and Delivered
  Since Sept. 4, the Postal Service has processed and delivered more than 122 million ballots, including both blank ballots delivered from election officials to voters, and completed ballots from voters to election officials.

“While our ongoing commitment is to maintain the highest level of service performance for all mail, we acknowledge that our full focus and prioritization on election ballots is having a near-term impact on the overall on-time performance of other products throughout the network,”  said Kristin Seaver, chief retail and delivery officer of the Postal Service. “Additionally, we are actively engaging with our management teams and union leadership to ensure we have the right level of staffing and oversight given the increased impacts of COVID-19, and our unwavering commitment to keeping employees and customers safe.”

The commercial mailing industry continues to have an uphill climb to get to any type of solvency. What will be critical for mailers in the coming year is to manage their businesses with critical planning and cash/debt management. 

As everyone, including our clients, adapts to the situation at hand, we all realize that nobody has a crystal ball to know what the future holds. My best advice is to be patient and kind while continuing to maintain relationships, control costs and support and help clients deliver their critical communications.

Recover and rebuild stronger together.