no more first class air mail

Will USPS Lose Air Delivered First-Class Mail?

Politics are as tense as ever, even with Trump gone. It appears that several democrats in Washington hold a grudge against anyone he appointed, including Postmaster General Louis DeJoy, as you can tell by the sort of questions he was asked last year. Dejoy, who comes from a background in private industry (logistics), has endorsed a plan that turns first-class mail into a ground only delivery service, essentially removing the 2-5 day delivery “guarantee” that isn’t really a guarantee in any sense of the word I’ve ever used because it isn’t like you can file a claim on late first-class mail and expect to get your money back.

Although details on the plan are scant, it appears as if DeJoy wants to turn the Post Office into a government entity that functions the same way a viable business would have to, that being one that routinely pays for its own expenses and liabilities (of which the USPS has a lot). In 2020, the USPS lost $9.2 BILLION.

For reference, that’s almost a billion dollars more than the annual GDP of Kyrgyzstan. For every dollar that ANYONE in Kyrgyzstan made, USPS used one to wipe their metaphorical butt. Add on $188.4 billion in liabilities, and you see why some people are calling for a massive overhaul. There’s some people who think that USPS shouldn’t be liable for the amount of liabilities they are forced to take into account (30 years of pensions), but that’s not something within the scope of what people in power are currently talking about.

Without getting too political, I think he’s right to say that the USPS is in shambles. As someone who has spent hundreds of thousands of dollars on postage, I can tell you from experience that a large portion of the people who work there wouldn’t survive in any sort of business that tracked productivity. There were times when I would have to wait MONTHS to hear back about money I was owed. But it seems that there’s a group of (largely big-government democrats) who think that any sort of move towards efficiency will sully the good name of the United States Post Office and all the services it provides, never mind that only 38 percent of first-class mail was delivered on time at the end of 2020, the Postal Service reported in federal court.

This being said, small businesses who rely on first-class mail for their less than 1 lb shipments are going to face one of two realities:

Scenario 1 is the big government proponents win out and USPS maintains its “promises” associated with air mail. We all know that this has nothing to do with the actual likelihood that air mail will be delivered on time, however as long as they advertise 2-5 day shipping, it will give both platforms like eBay and Amazon as well as customers a the validation they are looking for when they push the costs of delayed shipments onto small businesses. Items will get to customers faster, but not all the time and not in any reliable way. It will also probably stay similarly cheap, by relative standards.

Scenario 2 is probably less popular but what I hope happens. In this outcome, there are no more empty promises and the cost of first-class mail rises dramatically for destinations that carry a higher cost. This will encourage private businesses like FedEx and UPS to find more cost-efficient ways of sorting small parcels (something Amazon is already way ahead of the game) on as well as push the costs associated of delivery onto customers instead of small businesses. Otherwise put: things are costing what they should.

So what does eBay look like without cheap first-class mail shipping? Honestly, we’ve already seen a lot of it. A few years ago, you could ship anything under 14 oz for under $4, now some first-class mail shipments cost close to $6. There is less and less benefit of shipping items under 8 oz, as well, as the under $3 price only exists on sub 4 oz shipments that travel a relatively short distance. Gone will be the days of $9.99 with free shipping, which, in my opinion, is a good thing because the kind of stuff that gets sold for $9.99 with free shipping is usually trash and resellers/small businesses should be focusing on items that provide FAR more value than that.

What’s gonna happen? Who knows. It might be that this is just a bargaining chip for DeJoy to negotiate higher USPS rates while still keeping air mail. OR President Biden might add a bunch of left-leaning politicians to the board of governors and they’ll vote DeJoy out in favor of someone who thinks that routinely losing money and needing to get bailed out by the federal government is worth the service that USPS provides. I can see benefits to both strategies and I can see pitfalls, as well, so it’s not like theres a definitely right (or wrong) answer.

Per usual, it makes the most sense for businesses to ignore the squabbling in DC and focus on finding ways to provide more value at a proportionally lower cost. In other words: raise the average sale price (ASP) and lower the acquisition cost. When you do that, it won’t matter what those idiots do with our money.

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