Postal Affairs Update, November 19, 2020

November 19, 2020

United States Postal Service operations handled the largely vote-by-mail federal election without major issues. COVID-19 continues to spread, though, with retailers and brands prepared to lean heavily on e-commerce for the holidays. The Postal Service has pockets across the country where the pandemic has affected staffing. Meanwhile, President-elect Biden named his USPS agency review team, which is led by a former Deputy Postmaster General.

Quad’s Postal Affairs team remains committed to keeping you up to date and informed. As a significant mailing industry partner, we are in a unique position to provide clear and accurate information regarding the state of the USPS and suggest best practices during this time. Please notify the Quad Postal Affairs team if you become aware of any changes, questions or something new related to how the USPS is reacting to the pandemic. We will investigate and update all. Please send inquiries to the Quad Postal Affairs Distribution list (Postal Affairs – Team) or ask your Quad representative.

Here are key developments since our last update:

2021 pricing update

The Postal Regulatory Commission officially approved the USPS market dominant price changes for 2021 on Friday, November 13. The Postal Service then filed its pricing changes for competitive mail with the PRC on Tuesday. Shipping Services price increases vary by product, but are up across the board.

Quad continues to work with individual postal clients to advise on how pricing changes will affect them. There are options to reduce total costs to mail, even as prices increase.

Pandemic shifts holiday strategies

The holiday season started in October as retailers want to avoid crowded brick-and-mortar stores as COVID-19 numbers grow. An eMarketer report predicts that e-commerce will jump 35.8% over 2019, to account for 18.8% of total retail sales.

This will be both a boon and a challenge for the Postal Service — more parcels will help offset declines in other categories of mail. But it will also stretch staffing, which could be affected in pockets of the country where the pandemic is hitting hardest.

Retailers and the Centers for Disease Control & Prevention are strongly encouraging shoppers to shop online and buy gifts early in case shipping is slowed. For its part, the USPS is staffing up for its seasonal peak — part of 2020’s “logistics hiring boom.”

Marketing mail campaigns started earlier, too. Packages shouldn’t affect in-home dates for flats and other MM pieces. Quad continues to closely monitor performance.

USPS releases final fiscal year numbers

As expected, the Postal Service experienced significant declines to overall volume. It experienced a net loss of $9.2 billion, $343 million worse than in 2019. Controllable losses also grew to $3.8 billion.

Operating revenue grew by $2 billion thanks to the growth in parcels over FY2019. But operating expenses rose by $2.3 billion, notably in the areas of compensation, retirement benefits and transportation.

E-commerce might be more prevalent in the near future and longer term. Parcels are where the USPS faces competition, though. It can’t count on the category to generate revenue like it did in 2020. Leadership will have to make operational changes. And Congress must take action to ease the financial burden.

Biden administration names USPS agency review team

President-elect Biden began transition with teams to review government agencies. As PostCom notes, “The team tasked with looking at the Postal Service (and the Postal Regulatory Commission) is comprised of eminently capable individuals with backgrounds in labor, technology and public policy.” The four-member USPS team includes former Deputy PMG Ronald Stroman as Team Lead.

The Biden administration will have ample opportunity to affect USPS operations and performance. Open seats on the Board of Governors and positions on the Postal Regulatory Commission are required to be bipartisan bodies. But there are spots to fill immediately, with more to come. The biggest question is how the President-elect will approach comprehensive reform legislation.

Delivery performance

The USPS released its service performance numbers for Q4 of FY2020, with First Class mail down sharply for single piece and commercial categories. Marketing Mail was in-home on time at an 88.5% rate versus 94.6% in Q4 of FY2019. Periodicals were weak last year when in-home 88% of the time — for Q4 of FY2020, service declined to 73.4%.

Localized labor shortages and operational initiatives hurt service. The Office of Inspector General also found that internal changes that were primarily communicated orally caused confusion, and that impacts of changes weren’t properly studied prior to implementation. These were exacerbated by staffing shortages due to the pandemic. The full OIG report is available as a PDF.

Letters have moved a little faster since the election, flat mail at about at the same rate. FSS mail facilities have been slow for the past several weeks. This always happens as volume increases. But it’s notable that some facilities that have been on the list for 4-7 weeks, in Pennsylvania, North Carolina, Illinois, Colorado, Arizona, Massachusetts, Missouri and Ohio.

First Class saw some improvement last week. But 75% in-home by Day 3 for First Class mail isn’t good — it should be over 90% at that point. At this same point last year, 89% was in-home through Day 3. We could count on that or better every week, no matter the volume. We continue to seek answers for delays, and to work with the USPS to know about issues before mail enters their system.

Mail Volume

Numbers reflect change relative to the same period last year.

Week of November 9:

  • Total: Down 14%
  • Packages: Up 28%
  • Single Piece: Down 11%
  • Presort First Class: Down 15%
  • Marketing Mail: Down 16%
  • Periodicals: Down 11.4%

Mail Volume for FY2020:

  • First Class: Down 2.4%
  • Single Piece: Down 2.6%
  • Marketing Mail: Down 11.8%
  • Periodicals: Down 8.7%
  • Packages: Up 22.4%