Decline in Mail Volume Concurrent with Rise in Stamp Prices: Understanding the Causes
The U.S. Postal Service (USPS) is grappling with financial challenges in the 21st century digital economy. Despite frequent price hikes on stamps, shipping, and package delivery services, the USPS continues to lose money, with a net loss of $6.5 billion reported in 2023.
Key factors contributing to the USPS's financial woes include decreased mail volume and rising operating costs. First-class mail, the most profitable segment for USPS, has seen a 5.4% decline in volume for the latest quarter. Although Marketing Mail volume slightly increased, overall total mail volume fell 2.8% year-over-year.
Expenses have risen nearly 3% compared to the prior year, driven by inflationary pressures on compensation and benefits costs, including workers' compensation adjustments that added $237 million in non-cash costs. Other operating costs also increased by $205 million.
The USPS reported a net loss of $3.1 billion for Q3 FY 2025, up from $2.5 billion the previous year. Controllable losses increased by $522 million to $1.6 billion.
The USPS is also burdened by financial structure challenges, such as the legal requirement to pre-fund retiree health benefits, an unusual and costly mandate that impacts the financial health of the institution.
Despite these challenges, the USPS is making efforts to stabilize. The organisation is pursuing operational efficiency, new product strategies, and pricing adjustments, including raising the current price of a forever stamp from 55 cents to its current rate of 78 cents.
The USPS is also investing in new technologies, such as electric vehicles, and exploring the possibility of Sunday deliveries, although these pilot programs have been costly.
The writer, who is the president of Exit Stage Left Advisors and a partner at Exit Wealth, questions the value of paying 78 cents for a lower quality service from USPS, especially when private carriers like FedEx and UPS are thriving and investing in automation.
The USPS, a 247-year-old institution, is facing a steep climb in adapting to the digital economy, with mail volume having dropped more than 50% since 2001. The organisation must continue to make operational adjustments and pricing changes to remain competitive and sustainable in the face of these challenges.
References:
[1] USPS. (2025). Q3 FY 2025 Financial Results. Retrieved from https://about.usps.com/who-we-are/financials/quarterly-financials/quarter-3-fy-2025.htm
[2] USPS. (2025). Mail Volume Trends. Retrieved from https://about.usps.com/who-we-are/financials/mail-volume-trends.htm
[3] USPS. (2025). Ground Advantage Package Service. Retrieved from https://about.usps.com/who-we-are/postal-products/shipping/ground-advantage-package-service.htm
[4] USPS. (2025). Price Change FAQs. Retrieved from https://about.usps.com/who-we-are/postal-policies/prices/price-change-faqs.htm
[5] USPS. (2025). Postal Service Reports Controllable Loss of $1.6 Billion for Q3 FY 2025. Retrieved from https://about.usps.com/newsroom/national-releases/2025/pr20_016.htm
- The financial struggles of the U.S. Postal Service (USPS) in the 21st century digital economy are attributed to factors like decreased mail volume, rising operating costs, and the legal requirement to pre-fund retiree health benefits.
- In Q3 FY 2025, the USPS reported a net loss of $3.1 billion, an increase from $2.5 billion the previous year, with controllable losses climbing to $1.6 billion.
- The USPS is fundamentally changing its approach, focusing on operational efficiency, new product strategies, and pricing adjustments, such as raising the price of a forever stamp from 55 cents to 78 cents.
- Despite these efforts, some question the quality of service provided by the USPS given the rise in price, particularly in comparison to private carriers like FedEx and UPS who are investing in automation and thriving in the current economy.
- As the USPS, a 247-year-old institution, faces a steep climb in adapting to the digital economy, it must continue to make operational adjustments and pricing changes to remain competitive and sustainable in the face of these challenges.
