In 1962, a first-class stamp cost only 4 cents. Since then, the price of stamps has risen by more than 725 percent, causing many disgruntled consumers and businesses to abandon snail mail for e-mail.
After Saturday, the price of a first-class stamp will increase from 34 to 37 cents, as part of an overall rate increase of 7.7 percent that could lead many businesses already hit by the economic downturn to forego traditional mail in search of cheaper, electronic alternatives.
The latest increase will drive yet another nail in the coffin for the beleaguered, money-leaking agency, postal watchdogs say.
"The postal service is, in essence, shooting themselves in the foot by raising their prices," said Rick Merritt, founder of PostalWatch.
The current rate hike is the largest in a round of three increases in the past 18 months.
The United States Postal Service (USPS) expects a net loss of $1.5 billion this fiscal year ending in September, its third consecutive year of losses. Mail volume has dropped by almost 3 billion pieces between September and November 2001, according to the Direct Marketing Association.
The postal service's greatest competitor isn't emerging forms of electronic communication, Merritt insists.
Its "largest competitor is other forms of advertising," Merritt said. "The threat is from the postal service pricing themselves out of the market."
While virtually all other marketing mediums have lowered their rates to attract companies that are reevaluating where to deploy their advertising dollars, the USPS has continued to increase rates.
"At some point, direct marketing becomes non-cost-effective," Merritt said.
The USPS claims that the rate hike is necessary to meet rising expenses for fuel, transportation, utilities, labor and health-care benefits. The agency depends on rate increases to cover operating costs, since postal operations are not subsidized by tax dollars.
But electronic delivery includes none of these expenses, says Jerry Rackley, director of corporate communications for Esker Software, a vendor with products that automate the creation and delivery of e-documents.
Postal rate increases benefit e-delivery companies like Esker Software, StreamServe and Hewlett-Packard.
"When the post office does this, they're helping us and companies like us (that are moving documents to e-delivery)," Rackley said. "Deficits are not going away. The post office is going to have to raise rates again if they have any chance of getting in the black."
More and more, marketers are turning to TV, e-mail and the Web as future postal rate increases appear imminent.
"Cost increases are converging with the penetration of Web and e-mail," said Steve Broadway, vice president of market planning for Esker Software. "Because Web and e-mail have penetrated so deeply (in day-to-day business), they are very viable alternatives for those kinds of documents."
"The relationship between the alternatives (like the Web and e-mail) are changing and it's not going to change to the benefit of the postal service," Merritt said. "As they continue to price the cost of their product related to other mediums higher and higher, it's going to have a negative impact on their percentage of the advertising dollars."
The same document that costs 65 cents to manually prepare and mail can be delivered electronically as a fax, e-mail, e-mail attachment or Web page for between 1 and 5 cents, Rackley said. With e-delivery, documents can be delivered in a matter of seconds rather than days.
Although it can cost anywhere from $15,000 to $200,000 for a business to convert to e-delivery, most organizations already have key infrastructure components in place. Since over 90 percent of business documents originate digitally, conversion to e-delivery is often effortless.
Not everyone is converting completely to e-delivery, however. Since the cost of conducting an e-mail marketing campaign is close to the cost of conducting a physical mail campaign, many companies are testing out hybrid systems of electronic and physical delivery.
The postal service has attempted to compete with the private sector in everything from pre-paid calling cards to priority mail and electronic billing.
The USPS is working on initiatives like hybrid mail, where correspondence that originates in electronic form is delivered as physical mail.
Despite these initiatives, the USPS is struggling to adapt to electronic forms of delivery.
"E-delivery is gaining momentum and winning new converts every week," Rackley said. "The question is, is the post office going to get there fast enough?
"They're trying to fight a 21st-century war using 19th-century weapons."
