E-Commerce Drains Billions of Letters from Post Office

By Evan Schuman  |  Posted 2004-12-08

E-Commerce Drains Billions of Letters from Post Office

The traditionally long lines in post offices during the holiday season are noticeably shorter this year, and figures released Wednesday show why.

About 1.1 billion fewer pieces of snail mail were sent in 2004, and thats on top of an almost 3.5 billion drop from 2003 and a 1.3 billion drop from 2002. All told, the governments figures show that Americans sent 103.7 billion pieces of first-class mail in 2001 and only 97.9 billion pieces in 2004, a loss of some 5.8 billion pieces of mail or about a 6 percent drop.

Paul Harrington, a spokesman for the U.S. Postal Service, blamed the first-class decline on technology. E-mail is clearly a culprit, he said, but fax, instant messaging and various other forms of electronic communication are also playing a role.

Although this may be a bad sign for the future of the handwritten letter to grandma, Harrington says this is much more a business issue, with business communications still accounting for the vast majority ("high 80s," he projects) of all first-class mail.

The ability for many companies to collect payments by wire transfer, PayPal, direct deposit and even credit cards is taking a huge bite out of the checks that get mailed to businesses. And Web bill access is starting to shrink the number of bills that have to go out.

Teenage consumers are also changing the way Americans use the post office. To read about other ways retailers are struggling to sell to teens, click here.

"Many vendors are accepting payment online. Were reaching the point where it appears that there is not going to be a continuous growth of first-class mail," Harrington said. "That was one of the assumptions we operated on for a very long time."

Package shipments are a different story. From 2000 through 2002, package shipments started to decline—from 1.13 billion pieces in 2000 to 1.09 billion in 2001 and 1.07 billion in 2002.

That multiyear dip had been attributed to e-commerce players taking over shipments of tons of packages—especially around the holidays—and opting to use Federal Express, Airborne, DHL and UPS a lot more than the post office.

Much of that initial package loss, Harrington said, was because the post office was still "highly regulated" and therefore couldnt offer the same kind of discounts and special incentives that private companies could.

Next Page: Reversing the slump.

Reversing Slump

But the U.S. Postal Service has now reversed that slump, with its 2003 package numbers pushed back up to 1.13 billion and the newly released 2004 numbers showing roughly the same figures for this year.

Even e-commerce shoppers have second thoughts, with abandoned shopping carts a continuing fear for e-tailers. But is the meaning of an abandoned shopping cart changing? To read more, click here.

Harrington said the leveling off appears to be for two reasons. First, the Post Office has consistently offered package shipment services that are much lower cost than private rivals offerings. With businesses and consumers cutting back, cost is a key issue.

Secondly, at least one small corner of e-commerce has been very friendly to the Post Office: eBay. Not only does eBay prominently push the post office as a shipment option, Harrington said, but its creating package opportunities that simply didnt exist before.

"The Internet has opened up new opportunities to us," he said. "These eBay sales, before they would have happened at a yard sale, a collectors convention, some sort of venue like that where package shipping of any kind wasnt needed."

In a clear win for the post office, bulk business mail (often affectionately known as junk mail) has been soaring in popularity recently, despite initial fears that the much cheaper spam would hurt it.

After a sharp drop from 2000 (90.1 billion pieces) to 2002 (87.2 billion pieces), its picked up dramatically, hitting 90.4 billion pieces in 2003 and 95.6 billion pieces in 2004. The one-year 5.1 billion reported increase for 2004 far exceeded even the postal services internal projection, which predicted an increase of only 3.9 billion pieces.

Harrington attributes the bulk business increases to postal rates having remained stable "for one of the longest periods" in postal history, adding that SPAM has proven much less effective than bulk snail mail. Also, he noted that bulk business mail also includes a lot of requested documents, such as catalogues.

Retail Center Editor Evan Schuman can be reached at Evan_Schuman@ziffdavis.com.

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