Mail volume is in decline…you may have heard. So it might surprise you to learn that many posts around the world still earn more than half of their revenues from lettermail.

In fact, mail remains a profitable business. A collaboration with German research firm WIK-Consult, our latest paper, Mail Profitability in International Posts, examined 13 international posts and found only one, Australia Post, lost money on mail over the last five years. (Data was only available from 2011 to 2015). For eight of the 13 posts, lettermail is the largest source of profits — higher even than parcels and logistics services, which tend to get all the attention these days. Indeed, even highly diversified posts such as Singapore’s SingPost, which also provides courier services, digital mailboxes, and self-storage services, have better profit margins in mail than other business lines.

We dug a little deeper into why mail has remained profitable, even as volumes have dropped. We analyzed five posts — Australia Post, Belgium’s bpost, Swiss Post, Germany’s Deutsche Post DHL, and the UK’s Royal Mail — to determine the main drivers of mail profitability. We chose these five based on the availability of data, the diversity of their circumstances, and a variety of different regulatory and market environments.

It doesn’t take an economist to understand the basic formula behind profitability: revenue minus cost equals profit. Thus, posts that were able to raise revenue, particularly revenue per piece of mail, and lower their operating costs were best able to preserve mail profitability. All five posts pursued similar strategies to achieve this outcome: reduce the size of the workforce, automate mail processing, shrink the number of retail facilities, and streamline sorting and delivery of mail.

We found two factors were crucial in aiding posts’ efforts to raise revenue and cut costs:

  • Less restrictive legal and regulatory environments including the freedom to raise prices above the rate of inflation, as well as labor and pension laws that are favorable for the post.
  • Government support including direct subsidies, debt relief, restructuring aids, tax credits, and transferring pension liabilities to the federal government.

We noted that the earlier a post restructured and implemented the favorable pricing and regulatory options, the higher the impact on posts’ profitability as these posts have had more time to see a return on investment. This is hopeful news for posts that only recently started restructuring as it could improve future profitability. 

Comments (9)

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  • anon

    This is Now the third time the USPS HAS NOT DELIVERED to our door. Whether it be Monday Wednesday or Sunday, it doesn’t matter. One time a package was tied in a plastic bag on the front of my mailbox on the road in plain sight for anyone to steal it. Really getting tired of this. My husband is on the phone with Amazon right now because of a product that was being delivered today. We were here at the time they said was the first delivery attempt at 9 something this morning. No attempt happened. We were not home at the second attempt at 3 something this afternoon. Very frustrating. I may stop buying from Amazon because of the bad shipping service, Prime member or not.

    Nov 26, 2017
  • anon

    So..- our district vmf just came and took my ffv ..why?...they inspected it<3mos ago...who is auditing the charges at these vehicle maintenance facilities???...we also use a local mechanic and tow truck driver...3 people charge the p.o. ..?

    Jul 14, 2017
  • anon

    I have web stores on numerous sites. I work out of my home filling orders and shipping. I was using the USPS website to print shipping order labels. Well someone got the bright idea to remove the first class option from the ship and click site. Most my products weight between 10 oz and 12.5 oz for instance a DVD or 30 pieces of Kwikki flat backs, or 5 hair bows. I have enjoyed my 8 yrs using the USPS ship and click with my home business. Now I am having to leave packages in the mail box for postal worker to pick up and ship then leave me bill envelope in mail box. This is huge inconvenience for all home businesses. I do not want to use or any other postal company. I want to use USPS a trusted name I was raised with. So will who ever got the bright idea to remove the first class print option PLEASE PUT IT BACK!! You are losing money from thousands of home based business.

    May 08, 2017
  • anon

    Agreed! Please put the First Class option back on Click & Ship!

    May 08, 2017
  • anon

    The only reason the Postal Service is in the red is because congress has been using it to add to the general fund and pay for other (non-postal related) stuff. Congress passed a law in the waning days of the Bush administration that caused to USPS to pay for their retiree medical cost for 75 years into the future, and gave them 10 years to do it! They mandated that the USPS pay over 5 Billion dollars a year into this fund. No other government or private business has this onerous requirement. If you remove that dead horse, then the USPS is in the black every year. Congress passed the law but refuses to help ease the burden it created.

    May 05, 2017
  • anon

    I am one of our NEW Neighborhood Watch Facilitator and representative . I am writing on behalf of our TEN Summitridge Ct. neighbors . Our community mail box was vandalized three months ago and we have yet to have the old box replaced. Having to drive to the Pittsburg Main Post office to pick up our mail is creating unreasonable hardships for us SENIORs. We respectfully request that you expedite the installation of our mail box and , if possible, include a SURVEILANCE CAMERA to avoid such recurrences and or to catch these criminals. We thank you in advance for your immediate attention to our community concerns.

    May 01, 2017
  • anon

    I know the USPS operates in the "red" each and every year. I know there has been discussion about cutting Saturday delivery. Has anyone considered business and residential deliveries to every other day. Say Monday, Wednesday, and Friday for half the people and Tuesday, Thursday, and Saturday for the other half. This wouldn't be too great an inconvenience and postal paternal could adjust rather quickly. The USPS could reduces their full f time permanent employees by 30 -40% and the number of vehicles by the same amount. There would be a significant reduction in fuel cost as well a maintainence cost. My daughter lived in a subdision in Columbus In. that used mail box clusters in different locations with in the subdivision. This made it much faster for the postal worker on that route to diliver the mail. I live in a subdivision in Pineville, LA that has approximately 125 homes and the postal worker has to drive to each home in the subdivision daily. The postal worker spends anywhere from 45 minutes to and hour making the deliveries in my subdivision alone. The time could be cut in half with mail box clusters. I' m sure there is some good reason why these ideas haven't been implemented, but the only one I can think of is resistance from the Mail Carriers Union. It would seam that reducing US debt would be more important.

    May 01, 2017
  • anon

    You're right, cluster boxes in developments and subdivisions are a wonderful idea and would save the postal service millions of dollars each year. Not to mention how much more secure they are compared to an unsecured box placed next to the street or on a house. However, I work in the district office in Pittsburgh PA and every day residents are fighting with this office about not having curbside boxes in their neighborhood. Some believe because they live in a half million dollar or more home that they are entitled to delivery to their door. What everyone needs to realize is that the USPS is a BUSINESS that is not funded by tax dollars. As a resident you are entitled to one free form of delivery based on the postal service's decision of how best to provide you with delivery. The postal service should be given the freedom to make smart business decisions to enhance their bottom line and not be held over a barrel from people who think they pay our salaries and think they can dictate how they receive our service. The other issue in getting cluster boxes in new developments is with the developers. It is more cost effective for them to tell all residents to put up a curbside box rather than the expense of setting up and purchasing cluster boxes. Many developers do not even contact the USPS about mail delivery before they start building. I think the USPS should start some national advertising on how we intend to make our business more efficient and cost effective and remind people that this is a BUSINESS and that it is not funded by tax dollars. Then they should start a major push for cluster boxes, not only in new developments but in older plans as well.

    May 16, 2017
  • anon

    Paul you are so right and what a great idea. I have lived in subdivision of 350 homes and it take the mail carrier half a day between mail and packages. I have also lived a mobile home community of 274 homes and there we had a large metal box with individual boxes that required a key for entry. It took mail carrier only minutes to place mail in boxes. Again, great idea on the rotation days.

    May 08, 2017

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