on Jan 25th, 2010 in Finances: Cost & Revenue | 124 comments
 
How much does it cost to develop, print, ship, inventory, secure, sell, and cancel a stamp used to mail a letter?  What about the stamps that are never sold?  The Postal Service destroys billions of stamps each year because they are obsolete.  In FY 2008, the Postal Service printed 37 billion stamps, which cost $78 million to print.  In that same year, they destroyed old stamps, some of which were printed more than 10 years ago, that were valued at approximately $2.8 billion.  Those stamps were printed, shipped, counted multiple times in various inventories, and finally shipped back for destruction under secure conditions.  How much does this cost and does the Postal Service benefit from the expense?

Are there better alternatives to stamps?  Business customers often rent postage meters and use permits for bulk mail.  Now, the advent of online postage vendors has given individual customers an alternative to stamps.  Customers that use online postage can customize their postage and incorporate approved language or pictures.

Not everyone has access to a computer.  What can we do for people who do not have access to online postage or who simply do not want to use online postage?  One answer may be simplifying the Postal Service’s current stamp inventory.  What if all postage stamps were “Forever Stamps”?  Stamps would never become obsolete and have to be destroyed, and production costs would never eat up their contribution to overhead.  After a rate increase — now generally an annual event rather than every 3 or 4 years — there would be no 1-cent or 2-cent stamp shortages or rush to produce the next generation of denominated stamps. What about stamp collectors?  Would philatelic sales suffer if the Postal Service reduced the denominations it offered?  Commemorative Forever Stamps could be issued in limited quantities to satisfy collectors.  Some commemorative stamps could be sold locally, while others could only be ordered and shipped direct from a central location.  Forever Stamps that marked holidays or other special events such as birthdays would be very useful for people who wanted to stock up.  And what could be more appropriate for wedding invitations than “Forever Love” stamps? Do you know of a better method of postage payment, convenient and available to everybody that could be implemented? Tell us what you think. This topic is hosted by the OIG's Field Financial East directorate. Topic was revised to indicate that 37 billion stamps not $37 billion worth of stamps were printed in 2008.

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124 Comments

You don't want to totally obliterate the things that make the PO unique. Stamps are one of those things. While economically it may make sense to not even have stamps, I think there are a lot of people that would not like that to happen, including collectors, but also some people like to use different stamps at different times of the year, and even stamps of things they like like lighthouses for example. I don't feel that way personally, but I know a lot of people do. There are a lot of other ways to save money without destroying what people recognize as unique to the USPS.

Thank you for your comment. This is exactly why we posted this blog to stimulate ideas. We most definately do not want to loose the business from stamp collectors.

@DFM Thank you for your comment. This is exactly why we posted this blog to stimulate ideas. We most definately do not want to loose the business from stamp collectors.

1.stamps have more than a pure utilitarian function in culture.

2. the customers who are just looking for postage for the item sent, should have it. This would naturally
reduce stamp stock to be destroyed.
An educated guess: this would mean more advance sales against future mailing costs by customers. Inflation protected postage rates.
May as well sell gift cards with a postage rate locked in to buy postage anytime in the future. No stamp stock until needed. Maybe they already do.

3.Virtual stamps are not practical yet. Virtual mail including multimedia attachments sent to your street address(not email) is already available and no postage needed last time I checked.

@Anonymous - Thank you for your comment. The gift card idea is very interesting. We have heard about virtual mail. Unfortunately, that is through a private company.

[apologies in advance for the long post]

I have always liked postage stamps. I been a stamp collector since I was a kid (about 30 years now). I give sheets or books of stamps as gifts for all occasions, especially as wedding gifts so the newlyweds can send out all their Thank You notes.

I believe that USPS issues TOO MANY different stamps. I would like the number of new commemorative issues to be cut at least by HALF. But commemoriatives cannot be discontinued, that would cause USPS to lose a lot of revenue. With so many different commemoratives issues, it is really a difficult financial challenge for stamp collectors to acquire each and every issue. I think most stamp collectors would agree that there are TOO MANY commemorative stamp issues and fewer would make their hobby MORE enjoyable.

The cost to develop new stamp issues should always be looked at for ways to trim expenses. Re-using designs is one method being employed now and should be continued.

Perhaps there needs to be better forecasting of demand for certain issues so that printing, distribution, accountability, and destruction costs can be better controlled. Perhaps indivual post offices need more local control over the quantity of stamps sent to them. Perhaps a longer sales window for each issue will result in higher sales and less cost for recall and destruction.

As for all the different denominations availble, I believe we still need these. There are a lot of small, rural post offices that are not automated and in order for them to sell postage, they must still use and apply actual postage stamps on letters and parcels.

I operate a small home business and I ship approximately 60 small packets and parcels every week. I continue to use actual postage stamps for the vast majority and I buy an average of 200 dollars worth of stamps per week to ship these parcels. I keep an inventory of stamps worth about 400 dollars on hand at all times. I rely on the variety of denominations available in order to meet all the different postage rates required.

There are so many domestic and international postage rates that I need all of these stamps in order to fit my postage onto small-sized parcels. My smallest size box has a top measurement of 4 inches by 6 inches. After affixing my address label, the small customs form, and an airmail rubber stamp impression, there is not whole lot of space left for postage. It can be quite a struggle to fit the required posage in the space I have left. I rely on the largest stamp denominations possible to get the job done without wasting postage by applying more value than needed.

My current stock of stamps for shipping parcels includes the following denominations (in cents):
1, 2, 3, 4, 5, 10, 17, 23, 27, 39, 41, 42, 44, 50, 58, 59, 60, 61, 62, 63, 69, 70, 72, 75, 76, 78, 80, 84, 90, 94, 98, 1.00, 4.80, 4.95, and 16.50
Most of these stamps are from old rates and were issues several years ago. For example, a 23 cent stamps has not been available for probably at least 3 years. The few 60, 63, and 70 cents stamps I have now are the last I will be able to get -- when I run out I will not be able to get more.

Just this past week, I wanted to buy some 72 cents stamps at a post office. They had none as, I assume, they had to send back their stock for destruction. Now, I am having a harder time putting $1.44 in postage on interntional parcels that require it. I now must visit a post office that does have 72 cent stamps available or purchase them online at usps.com.

So, to summarize:

The number of commemorative stamp issues can be easily reduced and still satisfy stamp collectors and those that wish to use commemoratives for mailing. Let local post offices order quantities more in line with their anticipated sales.

The number of definitive issues should continue on the present course. The needs of small non-automated post offices need to be considered.

@zz449944 - Thanks for your comment. It was very informative.

I work in a small level 11 office, and I find all the odd denominations useful. I also have customers that like the odd denominations to put on packages and flats.

But I do feel that the forever concept needs to be expanded to include stamped envelopes (not just the addressed ones), postcards, stamped postcards and airmail. I have to order a minimum of 100 of many of these, and I will never go through that many before having them sent in for destruction. Think about how much money is being spent in the destruction of this product.

Commemoratives-make them smaller. I get too many complaints from customers saying that they are too big.

@Skippy - Thanks for your comment. In regards to comment about stamp envelopes, postcards.....Since you know you will never go through what you order, have you considered returning the unused inventory to the SDO for redistribution instead of waiting for the item to become obsolete and sent in for destruction?

Question #1: Why is the USPS destroying stamps at all? As long as they have a postage value printed they can be used. Destroying them makes no sense.

Two tips the USPS should take from the trading card industry:

Tip #1: Drop the requirement that a person has to be dead to appear on a stamp. Begin putting celebrities and superstars on stamps. People buy stamps now for postage. Put LeBron James or Jay-Z on a stamp and watch collector's and fans snap them up (and never use them!). Topps puts out a set of baseball cards with over 600 different cards. Why can't USPS do the same and issue over 600 different stamps. Baseball fans would buy them.

Tip #2: Issue limited edition stamps. Like short print, insert and parallels in the sports card industry, they drive up interest and bring people back to buy more. Put out a series of Derek Jeter stamps. Have Jeter autograph one out of every 10,000 stamps and randomly insert those books into the general supply. People will buy stamps attempting to get the Jeter autograph.

You ask if eliminating stamps is the answer. That is what is wrong with the USPS today. Eliminate, cut, drop, reduce are the only words they know. We should GROW the stamp market, not kill it off.

@Andy Kubat - Thanks for your comment. With the exception of “Forever” stamps the majority of the stamps have a denomination on them. When the rate increases it is highly unlikely that a customer will choose to put two or three stamps on a mailing versus one stamp with the current denomination. However, if there are no denominations stamp destruction would be minimized.

We like the two tips. Those appear to be very good marketing strategies that could generate more revenue for USPS.

What about the millions of dollars spent by collectors. That postage is pure profit as it is never, or mostly never, used for the purpose for which it was printed? Do we really want to give up those millions of dollars also?

@Larry - Thanks for your comment. No, we want collectors to continue collecting stamps and generating revenue for profit. We just wanted to stimulate a discussion about stamps and their use.

stamps are to meters, as coins are to credit cards.
There remains a need for stamps. Want to save money?
Cut management and empower employees. They are already doing the work in spite of management.

You want stamps - single stamps will cost you more - the more stamps you buy the cheaper they are......

@Diddy - Thanks for your comment. You are correct, but does that mean we should order more simply because it is cheaper and then incur additional cost to destroy them?

Still need stamps, but the idea of making all stamps that are issued as forever type stamps is a good idea. Could save millions, maybe even billions on reducing the above described destruction/obsoleting processes if they were held in a station's inventory until sold. Additional sales opportunities could be realized through the idea of mentioning "these are no longer obsoleted, however when our stock is depleted, there are no more made..." in regards to a specific year's Christmas stamp or other special occasions, stamps, etc.

@Tired PTF - Thanks for your comment.

USPS still has very small offices & contract stations that don't have meters themselves - they still use stamps for everything. What would become of those offices? How can we expect everyone to use meters when we don't do it ourselves?

Convert everything to Forever stamps - have one for the first ounce rate and another for the additional ounce rate - then noone will ever need more than 12 stamps on anything, as that would need to be presented to a Postal employee anyway. But you'll still need the high denomination stamps for Express.

@ej72 - Thanks for your comment. Using meters was just one alternative we included to stimulate discussion. We are not recommending or suggesting one or none. We also mentioned expanding Forever stamps.

You mentioned needing a high denomination for express mail. If your customers come to the office to mail an express mail package, do they really need an express mail stamp? Could you use a PVI? Or do most of your customer's purchase express mail stamps and drop off the package?

Just curious.

If the USPS is going to print so many stamps perhaps selling them using all resources at their disposal which would include stamp vending machines! But they would rather get rid of the machine due to the cost of maintaining them and then turn around and destroy millions of stamps they already printed. Deploy, deploy,deploy, sell,sell,sell not destroy!

@DJH - Thanks for your comment.

"As long as they have a postage value printed they can be used. Destroying them makes no sense."-Andy K.

U.S. postage stamps, like U.S. monetary currency has a value backed by good faith in the United State of America government. It wasn't so many years ago that postage stamps were acceptable as currency to purchase goods. Granted there are associated cost in printing, handling and storing the stamps that cannot be avoided, there will always be cost in doing any business that cannot be avoided. It does not mean it's o.k. to be frivolous with expenses or that every dollar spent in doing business will yield a return in profit. But at the cost of $5.9 million to destroy FY2008 stamp stock, the USPS could much more cost effectively rewrite their administrative manuals and continue the use of the face valued stamps as postage. When a particular printing inventory of a stamp is at it's watermark depletion level, a policy deciding whether to renewal or discontinue the particular stamp could direct the actions necessary. Such a policy could be based on public opinion, the rate of sale and the cost of printing.
The migration toward the use of more varying denominations of "Forever" stamps would benefit the business model efficiency.

@Truthbetold - Thanks for your comment.

PVI labels, meter imprints, and print on demand stamps would eliminate the distibution, reserve stock, and accountability associated with preprinted stamps.

@Common Sense - Thanks for your comment. Would the print on demand also include stamps for collectors?

The reason for all the stamp destruction is poor demand planning. There has been no competent system to study historical consumer demand and apply it to production forecasting. The Postal Service will implement a new technology this spring that will serve this purpose for stamps and retail items. This system will eventually be used for operations supplies as the programs come onboard. This will allow the stamp program to continue its longstanding role of publicly acknowledging historical and cultural events and the people, whose talents, beliefs and actions led to our country's development and progress. This is educational and motivational...both good for the general public of our nation.

@SAL - Thanks for your comment.

The USPS should print all postage on demand. A 2-d barcode can be used for security and also be used by the USPS to route items to their destination more effectively. Unique barcodes would even allow a customer to track their mailpiece. Imagine if the sender knew that their mail was delivered to the customer?

@Self-Service Rules - Thanks for your comment. Would the 2-d barcode be printed on the stamp?

why are we destroying inventory that cost $5.9 million to produce... can't these stamps be used up by putting them on parcels? why are we literally throwing money away?

@12yrs&counting - Yes, it is possible that the stamps could be used on parcels, but would customers actually purchase those stamps to mail parcels? Or would they just simply bring their parcel to a Post Office and get a PVI label on their parcel?

As mentioned in other posts, small post offices, contract stations and some businesses need stamps in various denominations for their mail. Since meters and the online postage sites charge a fee for their use, some small businesses don't want to use them. As for reducing the number of stamps available or making more forever stamps, the USPS gets tens of thousands of suggestions per year for stamp subjects. They do produce fewer commemoritive issues now than they used to, but it's still a challenge to decide what's worthy from all those ideas. As for the idea of producing hundreds of different stamp immages, like baseball cards, it's an interesting idea but I think that would only work if they were produced "on demand." It's difficult to decide how many of each subject will be needed, which areas of the country they will be most popular, should they be made in books, sheets, singles, coils, etc? Everyone wants a different quantity or format. I do like the idea of charging more for small quantities. I work in a small office and many customers buy 1 stamp today, 3 tomorrow, 1 the next, for the mail they send out that day. If they have to wait behind someone with a more time-consuming transaction or if the post office is closed, they get annoyed. I tell them they can buy a book and they can drop the mail in the collection box 24 hours a day and won't have to stand in line, but they rarely take the suggestion. Maybe if we gave a discount for larger quantities they would, since money is a great motivator. After all, it costs the same for an employee to sell one stamp as it does a coil of 100 - possibly even more since you have to separate the single stamps rather than just setting a book or coil on the counter.

@Merk - Thanks for your comment. It is surprising to know that it is challenging to chose certain stamps for collecting.

You are completely forgetting the philatelic dividend the Postal Service gets from people who buy stamps and never use them. Some are colllectors. Others want to keep stamps associated with some person (Elvis was the biggest selling stamp in history), event (Christmas, Eid), college, state, cause, or hobby. The Postal Service earns at least $250 million from the sale of postage for which they will never have to deliver services. the printing bill is a tiny fraction of that, and the destruction of unused inventory an even more neglible cost....

@Nayo- Thanks for your comment. Not really, we just wanted to stimulate different ideas. We are well aware of the revenue generated by Philatelic sales.

My SDO (at least the one I had) was really fussy about taking stuff back. Unless you had a vary large quantity of something, or if your accountability was way out of line, they avoided taking anything back. I keep my accountability levels right in line, so when there is a destruction announcement, I have almost nothing to send back. The envelopes and postcards are usually the only things I get stuck with. If they had a forever version of them, then I would probably send nothing back.

@Skippy - Wow! Thanks for that feedback and the good job you are doing with managing your stamp inventory.

All stamps are forever stamps.44 for first ounce, .44 for 2nd, .44 for 3rd, etc... Formula stays the same regardless of price per stamp Airmail is double...2each .44 stamps for 1st ounce. Rule could be used for parcels also, .44 per ounce. We will make money on the deal.
Issue commenratives in limited quanities so collectors buy early, however all are are forever stamps that can be used as general postage whenever.

Use the rule of "KISS" keep it simple stupid

As a Philatelist I hope they don't do away with or reduce to Forever stamps only. As someone on a fixed income I do wish they would produce less designs each year. Each year there are from 80-100 or more different designs. A lot of money could be saved by not having to recruit artists, design stamps, create plates and printing so many stamp designs. Please do not do away with stamps altogether or convert to Forever stamps only. We collectors will be left in the cold.

The postal service should stop printing "wallpaper". There are too many stamps that commemorate nothing. I've been collecting US stamps for over 55 years and have stopped buying current stamps because there are too many and not worth collecting. I use to buy every issue. I know that there MANY collectors who feel the same way.

They could also should go back to printing stamps with water activated glue instead of self-adhesive glue which is much more expensive to produce and not environmentally friendly.

From a collecting point of view, the self-adhesive glue is going to migrate though the paper and damage the stamps as they age.

The post office has destroyed the hobby of stamp collecting by issuing so many varieties.

Thank you,
John Grover

I would suggest not destroying old stock. One a post office has received a shipment of stamps they should keep them until they are all sold out. After all, they are still valid for postage. So what if you need to add a small denomination stamp to get the current postage rate?

Do not get rid of stamps, they are too valuable for the Postal Service.

Using stamps has always been the most efficient way for people to pay for postage. Stamps also educate the public on many topics even though the hobby of stamp collecting isn’t as big as it once was. The one way the postal service can save money or even make money is to allow producing and selling stamps to be a profit making venture by privatizing the effort. Post offices will not need to stock postage stamps. Paid postage at post office will be marked in other ways. Privatizing the production and selling of stamps may cause an increase in price but the postal service could balance the extra cost to the public by sharing the savings. Rather for a stamp to represent a fraction of dollar amount they can represent unit weights or simply units of postage that would represent a unit of service very much like points used by credit card companies. An advantage of privatizing the production and sales would allow merchants to use the sale of stamps in the same way they price goods and services. The public could then realize savings through special sales of stamps. Merchants would buy stamps wholesale and like goods are sold today savings are realized by purchasing more. The Post Office will earn money through license agreements with producers. Not all producers would pay the same amounts because the license agreements will be priced by maximum allowable production amounts. Producers will pay and bid maximum quantities. There could be others benefits to the Postal Service by privatizing the production and sale of stamps.

Privatizing will allow the benefits of postage stamps to continue as it has proven its utility more than a century and a half the US postal Service (including the pony express) has been in existance.

How about "on demand" printing of stamps at the post office? That way stamps would not have to be inventoried. This could be tricky logistically, though, and careful planning would have to be in place to avoid fraud. The "forever stamp" idea is also interesting and appears to be far more cost-effective than the current process.

The three things that the Postal Service could do to reduce costs that I would fully support are:

1. Eliminate standard Saturday service. Perhaps allow Saturday delivery (like Sunday delivery currently) for Express Mail only.

2. Greatly reduce the number of stamp issues. Other than 1 oz. and 2 oz. stamps, we just need additional oz. rate, postcard, International LC rates, Priority envelope rate and Express envelope rate and then a limited set of definitives from 1c to $5. The American Design Series already covers 1c to 10c. Greatly reduce the number of commemoratives. The number of commemoratives in 1950 was 11. In 1970 it was 24. In 1990 it was 37. In 2000 it was 129! Last year there were about 69 commemorative face different stamps. I see no reason to issue more than 25-30 per year, with the exception of major events (like all the bicentennial issues).

3. Make as many stamps as possible forever stamps. Stamps issued at the current 1 oz. or 2 oz. rate, postcard rate, Priority or Express envelope rate, and bulk rate could all be forever stamps. Definitely make the recurring stamps forever stamps. There are five DIFFERENT face value self-adhesive Purple Heart stamps! If they were forever stamps there wouldn't be any returns.

Going back to water activated stamps isn't feasible because the public prefers self-adhesive.

1. I think instead of a 1 cent increase every year a larger say to 50 cents would be good provided the excess was put in a trust fund and the interest used to offset costs.

2. Reciently a lot of money wass spent creating a new waiting area with 4 counters since I had never seen more than 2 counter people and the old counter was just fine some of these remodels are just not needed it is after all a post office not a doctors waiting room.

3. Go to 2 or 3 deliveries a week for home delivery. This would be fine with me. If it is urgent they can email me. I first thought 3 times but 2 would also be fine. This coulsd reduce the number of carriers needed and reduce the fleet of vehicles and the associated gas and insurance costs of having 2 or 3 times as many vehicles out as are realistically needed.

4. I used to hand my internet packages to the carrier now I and usually 2 or 3 other sellers are in line taking up a large percentage of the counter persons time. Allow carriers to pick up packages from home based businesses or set up a van collection service like my neighbor that uses UPS she logs on and adds her house to the pickup list for the next day. She does this once or twice a week for her Ebay sales.

5. I usually glance at my carrier sort flyers and then take them to the outside recycle bin.

Get rid of discounted business and bulk sort discounts.

6. For over inventory. Do like many countries devalue the old inventory with a special cancel or mark and sell them. Or just print fewer commeratives since you know how many will be returned just print 20% or whatever fewer and use them till they run out. If post offices were overstocked with commemoratives then they can just order fewer of the next one. I remember when commeratives came out a few times a year and portrayed something important not elvis and bart simpson. If you need a christmas stamp or valentines stamp print them with a single design that is used year after year without a value and sell like the forever stamps.

7. Over print with a new value and sell as a charity issue. I think France did this after WW II. India had the refugee relief overprints series. Print Hati Relief on them and sell them for $1 or $2 a sheet as unvalued stickers. Or whatever the newest disaster is at the time.

Bill Lewis

I think the USPS should reduce its inventory and have a few more forever stamps including commemoratives. Just a few stamps per year and a few souvenir sheets and that‘s it (in reduced quantities – add a little more value for future collectors). I don't think we need those air mail issues as well. More semi postal issue would be better to help raise money for a variety of causes.

Sir:

Reduce the number of commemoratives issued each year.
Reduce the quantity of each issue. If stamps have to be destroyed, something tells me too many are being printed. Sell all Christmas stamps before issuing the next year's. Keep and sell, rather than destroy, stamps earmarked for destruction.
Thank you.

The USPS should cut back on the number of commemorative stamps issued each year and make more of those Forever stamps, like Canada does. I agree with several of the other comments that stamps should be issued for common rates: 1 oz, 2 oz, postcard rate, the three international rates (speaking of, put Canada and Mexico back to the same rate for more savings), etc.

Why not print all stamps on demand at the post office or somewhere else using Pitney-type machines? ?

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