World's postal services struggle with lower demand

[February 26, 2013]  OTAKI, New Zealand (AP) -- Sandra Vidulich is so excited about the leather boots she ordered through Amazon that she rips open the box in front of the postman and tries them on.

"I looove them," she declares, as the driveway at her tree-lined home in rural New Zealand briefly becomes a catwalk. "They're cool."

For now, a boom in Internet shopping is helping keep alive moribund postal services across the developed world. But the core of their business -- letters -- is declining precipitously, and data from many countries indicate that parcels alone won't be enough to save them. The once-proud postal services that helped build modern society are scaling back operations, risking further declines.

The United Kingdom is preparing to wash its hands of mail deliveries entirely by selling the Royal Mail, which traces its roots back nearly 500 years to the reign of King Henry VIII.

The U.S. Postal Service sparked uproar this month when it announced plans to stop delivering letters on Saturdays. New Zealand is considering more drastic cuts: three days of deliveries per week instead of six.

It's only in the past few years that postal services have truly felt the pinch of the Internet. Revenues at the USPS, which delivers about 40 percent of the world's mail, peaked in 2007 at $75 billion.

But the decline since then has been rapid. USPS revenue in 2012 fell to $65 billion, and its losses were $15.9 billion. It handled 160 billion pieces of mail that year, down from 212 billion in 2007. And it had slashed its workforce by 156,000, or 23 percent.

Elsewhere, the news is just as grim. La Poste in France estimates that by 2015, it will be delivering 30 percent fewer letters than it did in 2008. Japan last year delivered 13 percent fewer letters than it did four years earlier. In Denmark, the postal service said letter volumes dropped 12 percent in a single year.

The Universal Postal Union, which reports to the United Nations, estimates that letter volumes worldwide dropped by nearly 4 percent in 2011 and at an even faster clip in developed nations. Developed countries closed 5 percent of their post offices in 2011 alone.

And while Internet shopping continues to grow, postal services that once profited from their monopoly on letters find themselves competing for parcels against private companies like FedEx.

U.S. Postmaster General Patrick Donahoe, in an interview with The Associated Press, said he doesn't believe the service can ever regain the revenue from packages it has lost from letters. He said axing Saturday mail deliveries, while keeping six-day-a-week package deliveries, will save the service about $2 billion a year.

Donahoe said he thinks ending Saturday letter deliveries will keep the USPS a solid proposition for years to come.

"People still go to their mailbox every day and they wait for their mail to come," he said. "It's part of American life."

And it has been since the beginning. The postal service's role was defined in the Constitution, and Benjamin Franklin was the first postmaster general. The short-lived Pony Express achieved an enduring place in American folklore. Even the modern system of highways and airline travel grew from pioneering routes developed by the postal service.

"It's easy to forget how central this institution was to commerce, public life, social affairs," said Richard John, a Columbia University professor who has written a book on the postal service. "It was once very, very important. Of course, that was then and this is now."

Even now, however, much depends on the post office. According to the Envelope Manufacturers Association, the postal service is at the core of a trillion-dollar mailing industry in the U.S. that employs more than 8 million people.

And for delivering a paper letter cheaply, there is simply no alternative. If rural residents were ever charged the actual cost of mail rather than the subsidized standard rate, John said, the costs would be prohibitive.

The value of the mail goes beyond money in many places, including rural New Zealand. The postal carrier serves as a focal point for the community.

John Lahmert, the postman who delivered the boots, has been delivering mail to farms around the North Island town of Otaki for 18 years. The 72-year-old independent contractor seems to know everybody on his route and doesn't mind stopping for a chat.

Noeline Saunders greets him at the gate, wondering if her citrus trees have arrived. Not yet, Lahmert tells her. Barry Georgeson, a semi-retired farmer, calls out a greeting and wanders down to pick up his letters.

"We don't like change," Georgeson said when asked about the possibility of mail coming just three times a week. But he said he could learn to live with it.

Many seemed resigned to a reduced service.

"I think people can genuinely understand that the world is changing," said New Zealand Prime Minister John Key. "And while some people are still very reliant on the mail, for a lot of people that's a fraction of the way they receive information."

About 7 in 10 Americans said they'd favor axing Saturday deliveries if it allowed the post office to deal with billions of dollars in debt, according to a poll by The New York Times and CBS News.

Some countries, including Australia, Canada and Sweden, have already cut deliveries to five days a week. Others are tinkering with partial privatizations.

Exactly what Britons might expect under a privatized service remains unclear. Some speculate it could mean cutbacks.

Royal Mail's Chief Executive Moya Greene declined to comment for this story: "We're simply not doing interviews about the planned sale," spokesman Mish Tullar wrote in an email.

In policy documents, the UK government said six-day-a-week deliveries and standardized letter prices remain vital but that private investors will provide more financial stability than "unpredictable" taxpayer funding.

While letter volumes are falling in developed nations, the reverse is true in some developing countries. In China, mail deliveries are up 56 percent since 2007, driven by a more than fourfold increase in premium express mail, according to figures from China Post.

Yet people in China are accustomed to having their mail show up late or disappear altogether. As Internet use increases in the developing world, mail may never become as essential as it has been elsewhere.

Not everybody is ready to give up on letters. Reader's Digest sends out about 500,000 pieces of mail each week to people in Australia, New Zealand, Singapore and Malaysia as it tries to entice them to buy its merchandise.

"A lot of players are going for a digital strategy, and fewer are doing the direct-mail approach," said Walter Beyleveldt, managing director for the Asia Pacific region. "Because of that, the mailbox will get emptier. It will potentially become an exciting place to go and look."

New Zealanders, however, may be looking there half as often as early as next year, if proposed changes to the New Zealand Post's charter are approved.

The government is accepting public comments until mid-March. A quarter of those received so far were mailed in, a rate considered unusually high.

The other 75 percent? Email.

[Associated Press; By NICK PERRY]

Joe McDonald in Beijing, Yuri Kageyama in Tokyo, Lori Hinnant in Paris, Cassandra Vinograd in London, Pauline Jelinek in Washington and Jan Olsen in Copenhagen, Denmark, contributed to this report. AP researchers Yu Bing and Monika Mathur also contributed.

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