A country that doesn’t hesitate to drop $700 billion on its war machine now finds itself quibbling over $10 billion to run a very essential service. Of course, a lot of this talk about shrinking the United States Postal Service has nothing to do with its budgetary shortfalls. It is yet another example of short-term political opportunism. USPS might as well stand for United States Political Shitshow.
Admittedly, the details are scant — while some letter sorting machines have been decommissioned, it is hard to ascertain what is or was being planned. No matter what the actions, one should be aware of the unintended consequences of any plans to shrink the USPS. Even it’s rehabilitation needs to be carefully considered.
A report in the LA Times reveals the long-term societal damage of removing sorting machines. The reporters found that decommissioning even a few sorting machines can create backlogs that result in dead animals and rotting food. CNBC reporter Chrissy Farr recently reported that many people get their medication via USPS, and delays can have damaging effects.
It might be hard for politicians and their lackeys to see, but the postal service brings more than ballots and postcards. USPS plays a significant role in the US economy. Any actions against it have ramifications for businesses of all sizes. If there was any doubt, the pandemic proved that USPS is an essential service. It kept the country’s almost moribund economy moving, albeit at a sputtering pace.
The pandemic has made online commerce an incredibly significant part of our society. People across the demographic spectrum are now using some kind of online shopping. And many of those packages are delivered by our postal service. According to The Washington Post, “Week to week, package deliveries increased 20 to 50 percent in April compared with the year-ago period, and 60 to 80 percent in May.” If the package volume stays 15 percent over average, the USPS might not need further cash bailout.
Not all of the boxes carried by postal workers say “Amazon Prime.” Many of them come from the countless small and medium-sized businesses that thrive because of the USPS. To understand the impact of USPS on businesses, I reached out to four large commerce-related platforms: PayPal, Shopify, Stripe, and WooCommerce. I wanted to learn more about what percentage of their customers — businesses of all sizes — used USPS as a primary shipping method.
I am still waiting to hear back from Shopify, which paints itself as the savior of little guys, though it is perhaps as shitty as Amazon. PayPal is digging into the data. However, folks from WooCommerce, which is owned by Automattic, got back to me with some directional information. For the WooCommerce stores, the company didn’t have what it calls the “true” usage data (e.g., the actual purchase of labels by carrier). They could still provide a proxy number of participating stores with the USPS, UPS, and FedEx shipping extensions installed.
WooCommerce stores use these extensions to get live shipping rates from these carriers, so they should indicate how prevalent they are for their user base. Please note that there is an overlap in carrier usage, meaning some stores have more than one shipping carrier extension installed (in fact, 23% of them do). Here’s the percentage breakdown of active stores (at least one order) with the following carrier extensions installed in the last 12 months ending July 31, 2020:
- USPS = 61%
- UPS = 41%
- FedEx = 24%
Stripe folks said that they don’t have any visibility into users’ shipping methods. I am still awaiting responses from PayPal and Shopify, and hopefully, they can provide some context.
I also reached out to a handful of friends who run small businesses. Additionally, I pinged a founder-friend who runs a direct-to-consumer company. I just tried to (what is colloquially known as) “take the temperature” and just understand what might happen if USPS was shrunken drastically.
John Mooty runs NWKC, a Minnesota-based online clothing operation that makes limited run casual clothing in America. He is a small business owner who exists solely online. I am a massive fan of John’s clothing and consider him a friend. When I asked him, what would be the impact of shrinking USPS on his small business, he pointed out that “we would need to get set up on new systems.” And that is not the only thing. “Costs would go up significantly, and time getting to customers would generally increase as we ship USPS priority,” he said.
Currently, 100 percent of Mooty’s business is done via USPS. “One thing I would add too is the reliability in my personal experience,” he said. “I can count the USPS orders that have been lost over the past 5 years. I deal with lost packages big and small from UPS and FedEx at an exponentially higher frequency.”
Agyesh Madan, a co-founder of New York-based small menswear company, Stoffa, is one of the many business people worried sick about the loss of USPS. Over 90 percent of his shipments use USPS.
I asked some coffee roasters the same question. Almost universally, they said the costs of doing business were going to go up if they have to shift away from USPS and use more commercial providers.
Even direct to consumer brands are dependent on USPS. I asked Amy Errett, CEO of San Francisco-based hair products company, Madison Reed (and venture partner at True Ventures), if she could break down what percent of her products are shipped via USPS. The numbers are staggering — 12% are pure USPS, from pickup to drop off. Another 85% are Smartpost hybrid where FedEx picks up, and the USPS makes the final mile delivery.
If I had more time, I would ask more founders of direct-to-consumer companies, but you get the point.
USPS is part of the new future of retail. Main Street is no longer just on the street. Thanks to tools like PayPal, Shopify, WooCommerce, and Square, it is also online. And it needs USPS to do business.
Amazon can — and is — building their own logistics and delivery system. Not everyone can do that. All those politicians who complain about Amazon’s monopoly forget that the only way to fight the giant is to arm many David’s with slingshots. USPS is that slingshot. Instead of thinking about shutting down or shrinking USPS, we need to really work hard in helping it adapt to Mail Service 2.0.
I find it disappointing that more people in Silicon Valley aren’t vocal about USPS. A lot of my peers in venture capital benefit from the services of USPS, though they may not think about it often. For example, many are celebrating the growing importance of digital health without discussing the central role USPS plays in this service. “While use of e-pharmacies and e-doctors has doubled or tripled in the United States over the course of the crisis,” Mckinsey noted in a research note. “40 to 60 percent of consumers express an intent to continue using those services.”
“It also has a more immediate impact on the ever-increasing number of direct-to-consumer companies, including everything from digital pharmacies to online consignment shops,” noted Dan Primack, who writes about Venture Capital for Axios, in a recent edition of his newsletter. “If USPS is no longer a reliable constant, then the economics and viability of these companies change.”
Everyone from Shopify to PayPal to Square needs to step up and start to ensure that USPS is not disrupted, not for altruistic reasons but for selfish ones.
Moving forward, the idea of what is “mail service” requires careful consideration, as do the aspects of the mail service that need to be reinvented. One thing is undeniable — if you focus on macro trends, USPS has a lot of opportunities to build a business model that sits between the digital and physical worlds. In the interim, as a tax-paying citizen, I don’t mind that some of my taxes go towards keeping this inefficient but always essential and irreplaceable service rolling.