Why Bankruptcy is Not Such a Bad Idea for USPS

Bloomberg Businessweek reported last week that USPS is on the verge of bankruptcy. There are many reasons for that, but one thing I find disturbing is that USPS’ plan to raise its falling revenues is mainly based on sending you more junk mail and convincing banks and other businesses to keep sending you paper bills. So even though I like mail (who doesn’t?), I think bankruptcy might not be such a bad option in this case.

I’m not worried about the attempts to convince banks and other companies to keep sending paper bills. By now, there are many examples showing that paperless billing and communication with customers save companies a lot of money, so over time, USPS has very little chance to compete with the online alternatives. Their effort to boost junk mail is the issue that makes me worried.

Junk mail became such a inseparable part of the American life – according to ‘Do Not Mail’ campaign, “each year American households receive a total of 104.7 billion pieces of junk mail or 848 pieces of junk mail per household, requiring 6.5 million tons of paper.” However, most people don’t find junk mail valuable and according to the campaign, 44% of junk mail goes to landfills unopened. Yet, wasteful as it may be, junk mail became one of the backbones of USPS.

Why? Because marketers still find this marketing channel lucrative (regardless the slim response rate) and are willing to pay for it. Of course this cost-benefit equation works for marketers only because they don’t pay the real price of their junk mail, which includes externalities such as carbon emissions and waste disposal. Another factor is the fact that no one really asks us if we want to get junk mail – we just get it, courtesy of USPS.

Years of battle against junk mail and junk mailers generated some results but overall the problem is still there. I say a problem, but Patrick Donahoe, the Postmaster General, still looks at junk mail in terms of opportunity, telling Bloomberg Businessweek he believes junk mail is rebounding with the economy and arguing that the fact that in the last quarter of 2010, junk mail revenue climbed 7.1 percent “proves that there is viability in our system."

Donahoe sounds as if he is comfortable putting most of his eggs in the junk mail basket, which makes me wonder how he doesn’t understand that even if carbon emissions will remain an externality forever and ever, in 10-20 years at most, junk mail will disappear just like paper bank statements, and for the same reasons – not because it’s bad for the environment, but because it won’t be good for business compared to the digital alternatives that are becoming cheaper and offer better results.

So we can wait 10 or 20 years given current regulators who don’t really care, marketers that think junk mail still works for them and a messenger that lives in state of denial. Or we can hope USPS will go bankrupt and will have to rethink its business model.

Now, I don’t think USPS should stop operating, or disappear from our life – it is still providing many important services. It’s just that bankruptcy can become an opportunity for USPS to rebuild itself in a more sustainable format. This is a chance to reformat a system that doesn’t really want to do so, but doesn’t have a choice.

The big question of course is what they can do – how to build a winning strategy that will also be sustainable? There is no magic bullet and it won’t be without hurdles, but there are options available, starting with providing more digital mailing services to charging people in accordance with the actual number of pieces of mail they receive every month, just like we pay for electricity or water. Combine it with a simple option to opt-out of junk mail (Do Not Mail Registry for example) and more efficient digital marketing options for marketers and you got yourself a system that will incentivize people to consume less junk mail and companies to further use online and mobile alternatives. In other words – a win-win strategy.

I know – digital alternatives are far from being perfect and have their own environmental impacts. Still, the current system is so inefficient and wasteful that we’ll definitely see an improvement – the carbon footprint of one piece of junk mail is estimated in about 515 grams while the carbon footprint of an email is 40 grams.

I believe receiving only the mail you want to receive should not be a fantasy, but everyday reality. With the right business model it can be done, bringing USPS back to life and promising it a better future than it can imagine right now. Unfortunately, to get there we might have to to start with a bankruptcy.

 

Raz Godelnik is the co-founder and CEO of Eco-Libris, a green company working to green up the book industry in the digital age. He is also an adjunct professor in the University of Delaware’s Alfred Lerner College of Business and Economics.