Did you hear the one about the U.S. Postal Service wanting to stop delivering mail on Saturdays? Actually, that's nothing. Up in Canada, the postal service says it's planning to quit delivering mail ... period.
Or at least, delivering it door-to-door.
The postman always rings twice, or ...
Currently in Canada, 63% of mail recipients get their mail delivered "the old-fashioned way," by trusty mailmen hoofing it directly to home mailboxes or, for apartment dwellers, placing it in building lobby mailboxes.
Like the U.S. Postal Service, however, the Canadian version is racking up heavy losses from the worsening economics of the mail business. As shrinking volumes of mail result in declining revenues from mail, while pension obligations rise and operating costs remain stubbornly stuck, Canada Post is looking at potentially losing $1 billion annually as early as 2020. (Don't pity them too much, though. USPS lost $5 billion last year.)
Hoping to get ahead of the curve on the problem, Canada Post CEO Deepak Chopra (yes, seriously, that's his name) has outlined a series of moves aimed at reducing the service's costs -- including most of the measures we've already become familiar with here:
- Cutting employee benefits.
- Increasing employee contributions to their pension plans.
- Laying off 6,000 to 8,000 postal workers.
- Raising rates for postal customers.
Whereas here in the U.S., we grumble with every penny-or-three rise in the cost of a first class postage stamp (for the time being, still just $0.46), in Canada the plan is to raise rates by an astounding 35%, from $0.63 currently, to $0.85, in March. And those are the "bulk" rates. If all you need is one single stamp, Canada Post will sell it to you ... for $1.00.
The postman never rings at all
Now, in the cruelest cut of all, Chopra warns Canadians that this year, Canada Post will begin phasing out door-to-door mail delivery for city and suburban dwellers altogether. Henceforth, delivery to homeowners will be accomplished mainly at community maildrops -- similar to the hotel lobby arrangement of apartment dwellers, but on the street. (Rural residents will still be serviced individually, and parcels will still be delivered to Canadian doorsteps).
Chopra estimates that the simple step of making homeowners take a few more steps of their own, out of their houses, and down the street to a mail drop, could cut Canada Post's losses in half, saving $500 million a year.
Could it work here?
Canada Post and the U.S. Postal Service both claim ancestry from the English colonial system of mail, established by Postmaster General Benjamin Franklin in 1756. As such, the two systems are similar in form and function. And yes, this means that measures implemented to cut costs in Canada could be used to save money in the U.S. as well.
How much money? Well, if eliminating door-to-door delivery can save Canada $500 million a year, it stands to reason that the U.S., with a population nine times as large, could save $4.5 billion through a similar move. This, all by itself, would come very close to closing the USPS's $5 billion deficit from 2013.
Add in the $500 million in revenues that USPS hopes to generate from its new "Metro Post" project -- where USPS aims to compete head-on with FedEx (NYSE:FDX) and UPS (NYSE:UPS) by facilitating same-day delivery of packages ordered from local retailers -- and USPS could conceivably break even, with no further cost-cutting measures necessary.
That's right. No layoffs, no kicking Post Office retirees out of their health insurance plan, or delaying prepayments into the USPS pension fund. No post office closures. No mail sorting facilities closures, either. And definitely no need to eliminate Saturday delivery. None of the drastic "why-use-a-scalpel-when-we've-got-this-perfectly-good-meat-cleaver" measures for fixing the USPS budget.
In fact, Canada's plan makes so much good sense that you could almost imagine USPS wanting to give it a try here, too. Almost.
Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool recommends Berkshire Hathaway, FedEx, and UPS and owns shares of Berkshire Hathaway. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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