U.S. Postal Service: Overview of Initiatives to Increase Revenue and Introduce Nonpostal Services and Experimental Postal Products
Published: 2013-01-15T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: USPS continues to face a dire financial situation. Reducing costs is essential, but USPS also must generate additional revenue through the sale of products and services. PAEA, enacted in 2006, eliminated USPS's authority to offer nonpostal services unless they were offered as of January 1, 2006, and expressly grandfathered by the PRC. USPS may, however, offer new nonpostal services if they are related to the grandfathered nonpostal services. It may also offer experimental postal products that meet certain conditions. As requested, this report describes: (1) the nonpostal services grandfathered after the enactment of PAEA, experimental postal products offered since enactment of PAEA, and discretionary services USPS currently performs for other federal agencies; (2) initiatives--including nonpostal services and experimental postal products--USPS is pursuing to generate additional revenue and the status of these initiatives; and (3) the reasons USPS decided not to pursue other revenue-generating initiatives that it had identified.
GAO reviewed PAEA provisions and PRC decisions pertaining to nonpostal services, experimental postal products, and services performed for other federal agencies and USPS documents related to the initiatives that USPS chose to pursue and those it decided not to pursue. GAO interviewed USPS officials regarding these issues.
In commenting on a draft of this report, USPS agreed that its financial viability is dependent not only on cutting costs, but also on generating additional revenue.
section_title: What GAO Found
paragraphs: The U.S. Postal Service (USPS) currently offers 12 nonpostal services (i.e., services not directly related to mail delivery) that were grandfathered by the Postal Regulatory Commission (PRC) after enactment of the Postal Accountability and Enhancement Act (PAEA). These services--which include Passport Photo Services, the sale of advertising to support change-of-address processing, and others--generated a net income of $141 million in 2011. Since enactment of PAEA, USPS has received approval from PRC to offer eight experimental postal products, which are products that differ significantly from other offered products, such as the sale of gift cards loaded with a specified sum of money. Lastly, USPS performs at least four discretionary services (i.e., services it chooses, rather than is required, to perform) for other federal agencies, such as accepting passport applications for the State Department.
USPS is currently pursuing 55 new initiatives that it identified based on outreach to postal stakeholders. USPS chose to pursue these initiatives because of their potential to increase revenue and add value to the mail, among other reasons. Forty-eight initiatives are extensions of existing lines of postal products and services, such as offering Post Office Box customers a suite of service enhancements (e.g., expanded lobby hours and earlier pickup times) at selected locations and increasing public awareness of the availability of postal services at retail stores. Three initiatives are extensions of existing nonpostal services, including allowing customers to forward their mail to a new address using mobile devices. Finally, four of the initiatives involve experimental postal products, such as prepaid postage on the sale of greeting cards. These four experimental products are among the total of eight experimental products that have received PRC approval since enactment of PAEA. Forty-five of the 55 initiatives are ongoing; the remaining are under development.
USPS considered but decided not to pursue 25 other stakeholder-identified initiatives, primarily because of financial reasons. Twelve initiatives were abandoned because USPS determined they were not likely to be profitable or the initial investment was too high. Reasons for not pursuing other initiatives included insufficient stakeholder interest or lack of statutory authority. USPS would like to pursue revenue-generating opportunities in three areas--nonpostal services, shipments of alcoholic beverages, and services performed for state and local governments--if it is provided with statutory authority to do so. USPS officials said opportunities in these areas could improve USPS's financial position, but they emphasized that additional innovations will not be sufficient to return USPS to financial solvency. Results will also be constrained by the economic climate and by changing use of the mail. USPS's multiyear revenue plan detailing its competitive strategies is expected in the spring of 2013.

section_title: Letter
paragraphs: The U.S. Postal Service (USPS) continues to face a dire financial  situation and does not have sufficient revenues to cover its expenses,  putting its mission to provide prompt, reliable, and efficient service at risk.  As customers increasingly turn to digital communications and online  payment methods, total mail volumes have decreased precipitously,  falling almost 21 percent from fiscal years 2007 through 2011. In 2012,  USPS reached its $15 billion borrowing limit and incurred a $15.9 billion  net loss.
According to the Postmaster General, reducing USPS’s costs is essential,  but generating additional revenue is also necessary. Consequently, the  Postmaster General implemented a variety of strategies to increase  revenue, including strategies to strengthen the value of mail to  businesses, improve the experience of USPS’s customers, and compete  with private sector firms for the package business.
As requested, this report examines matters related to USPS’s provision of  nonpostal services (i.e., services not directly related to the delivery of  mail, such as Passport Photo Services). In particular, you asked us to  review those nonpostal services that were offered at the time the Postal  Accountability and Enhancement Act (PAEA) was enacted in 2006 and  that the Postal Regulatory Commission (PRC) determined should be  continued, or “grandfathered”. In addition, as agreed with your staff, we  also provide information on two other areas with the potential to generate  revenue: (1) experimental postal products and (2) services that USPS  performs on a discretionary basis for other federal agencies. PAEA  granted USPS the authority to offer experimental postal products, which  are those that are significantly different from all other products USPS  offers and have certain other characteristics. Such products include a  same-day delivery service for local buyers in selected metropolitan areas  and prepaid postage on the sale of greeting cards. Discretionary services  for other federal agencies are services that USPS may choose to pursue  but is not required to perform. Such services include collecting data on  vacant addresses for the Department of Housing and Urban  Development.  1.  The nonpostal services grandfathered after the enactment of PAEA,  the experimental postal products approved for market testing since  the enactment of PAEA, and the services USPS currently performs for  other federal agencies.  2.  The initiatives—including nonpostal services and experimental postal  products—USPS is pursuing to generate additional revenue and the  status of these initiatives.  3.  The reasons USPS decided not to pursue other revenue-generating  initiatives that it had identified.
To address these objectives, we reviewed and analyzed numerous  documents, including:  relevant laws, such as those pertaining to USPS’s authority to engage  in nonpostal services, experimental postal products, and services for  federal agencies;  reports on USPS’s nonpostal services, experimental postal products,  and services for federal agencies issued by GAO, USPS’s Office of  Inspector General, and others; agreements specifying the terms and conditions for USPS’s ongoing  cooperation with other federal agencies;
PRC decisions (orders) and relevant stakeholder filings submitted in  response to the PRC’s proceedings on USPS’s nonpostal services  and experimental postal products since PAEA’s enactment;  the results of USPS’s 2010 outreach to external and internal  stakeholders to identify potential revenue-generating opportunities,  including USPS’s 2011 plan for increasing revenue; and updated documentation on USPS’s current strategy and plan for  increasing revenue, which is under development, including  information on initiatives that USPS chose to pursue and those it  decided not to initiate; USPS’s rationale for these decisions; the status  of the initiatives that USPS is pursuing; and the available revenue and  cost estimates for these initiatives.
We also interviewed USPS officials, including the Chief Marketing and  Sales Officer and Executive Vice President, the Vice President for  USPS’s Domestic Products, General Counsel staff, and others. Among  other things, we discussed
USPS’s actions and processes for identifying and assessing  additional revenue-generating opportunities, including those related to  nonpostal services, experimental postal products, and discretionary  services for federal agencies;
USPS’s criteria for deciding which opportunities to pursue;  the status of its decisions; and  the reasons why USPS decided not to pursue certain initiatives and  obtained USPS’s views on what, if any, statutory authorities USPS  believes it needs to pursue other, potential revenue-generating  initiatives.
We also interviewed PRC staff to obtain additional information and  clarification on the nonpostal services and experimental postal products  offered by USPS since PAEA’s enactment, and on the services USPS  provides on a discretionary basis for federal agencies. Finally, we  obtained information on the status, results, and applicable time frames for  these services, products, and activities from USPS staff. Appendixes I, II,  and III provide more detailed information on USPS’s grandfathered  nonpostal services, approved market tests for experimental postal  products through November 2012,currently performs on a discretionary basis for federal agencies,  respectively.   and examples of services that USPS  We conducted this performance audit from April 2012 to January 2013 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: The Postal Reorganization Act provided USPS with authority to offer  nonpostal services. USPS used this authority to introduce a wide array of  products, such as prepaid phone cards; an electronic funds transfer  service between the United States and Mexico (Dinero Seguro); and retail  merchandise, such as T-shirts, mugs, and neckties. In 2006, PAEA  eliminated USPS’s authority to offer nonpostal services unless they were  offered as of January 1, 2006, and expressly grandfathered by the PRC.
PAEA directed the PRC to review USPS’s ongoing nonpostal services  within 2 years of enactment to determine whether they should continue  (i.e., be grandfathered), taking into account the public’s need for the  service and the private sector’s ability to meet that need. The PRC  defined, for the purposes of its review, a service to be an ongoing  commercial activity that USPS offered to the public for financial gain.  Using this definition, all nonpostal services that were offered as of  January 1, 2006, were ultimately grandfathered by the PRC.
With PRC approval, USPS can introduce new, related nonpostal products  if they fall under the umbrella of one of its grandfathered nonpostal  services. For example, because the PRC grandfathered Officially  Licensed Retail Products as a nonpostal service, USPS can offer a  variety of related products, including stamp dispensers and framed postal  artwork, as long as they are consistent with the underlying grandfathered  nonpostal service.
While USPS offers a number of nonpostal products and services, the  revenue they generate is relatively small. Nonpostal revenue in fiscal year  2011 was $173 million, accounting for a small fraction of a percent of  USPS’s total revenue of $65.7 billion.
PAEA required that grandfathered nonpostal services be regulated as  either market dominant, competitive, or experimental products.” Market  dominant services include those products where USPS exercises  sufficient market power that it can, among other things, effectively set the  price of such product substantially above cost without risk of losing a  significant level of business to other firms offering similar products. For  example, first-class mail letters and sealed parcels are market-dominant  products. Competitive services consist of all other products and are those  in which USPS competes with the private sector.cover its costs for these services.
PAEA also authorized USPS to conduct market tests of experimental  postal products if the product being tested (1) is significantly different from  all products offered by USPS within the prior 2-year period; (2) will not  result in an undue market disruption, especially for small business  concerns; and (3) is correctly classified as either a market dominant or  competitive product. The PRC, as a matter of practice, considers whether  these conditions have been met before USPS can begin a market test.  PAEA authorized market tests for products that are not anticipated to  exceed $10 million in annual revenue and authorized the PRC to exempt  products from this threshold if the annual revenue will not (or is not  expected to) exceed $50 million. Generally, a market test may not exceed  2 years. things, if there is a market for the product and, if so, to test various pricing  scenarios. The time frame allows USPS to demonstrate a “nexus” to the  mail and, consequently, that the product is a postal product. If USPS  believes a market test demonstrates that a product is suitable, it may  seek approval from the PRC to permanently offer it. USPS also may  terminate a market test if, for example, the test did not meet USPS’s  objectives.
If requested by USPS, the PRC may extend the testing period for an additional year. 39  U.S.C. § 3641(d). including the activities to be performed by USPS and the terms of  reimbursement, if applicable. One such agreement allows USPS to  accept passport applications on behalf of the U.S. Department of State  (State Department).
Given declining mail volumes, customers’ changing needs and their use  of the mail, and a desire to address these issues, USPS began engaging  with internal and external stakeholders within the postal community to  generate ideas for innovative products and services that could generate  additional revenue. In the summer and fall of 2010, USPS held a series of  discussions, including an innovation symposium with stakeholders  including business leaders, partners, customers, suppliers, and  academics, to gather insights on potential innovations and revenue  opportunities. According to USPS, the outreach generated over 1,500  potential initiatives, which were evaluated and winnowed down based on  a variety of factors, such as time to implement, return on investment, and  strategic fit. According to USPS, its decisions to pursue certain initiatives  have been guided by several recurring themes, including: making it easier and more convenient for businesses and consumers promoting mailing best practices, such as those that incorporate  barcode technology into advertising campaigns; and  innovating and leading in e-commerce delivery to meet the needs of  the mobile generation.
In addition to these recurring themes, each initiative is aligned to support  one of USPS’s three primary marketing strategies. These strategies are:  (1) First-Class Mail—slow the diversion of First-Class Mail by  differentiating hard copy from digital mail and embracing new  opportunities from digital and social media; (2) Marketing Mail—simplify  the use of marketing mail for businesses and promote emerging  technologies for marketing mail; and (3) Shipping Services—develop  solutions to grow shipping services in the e-commerce market.
USPS’s overall strategic direction is described annually in its  Comprehensive Statement of Postal Operations and the impact of these  strategies is described in its annual Integrated Financial Plan—both of  which are publically available. While the 2013 Integrated Financial Planindicates that USPS expects an operating loss of $2 billion in 2013, it  projects that USPS’s revenue-generating initiatives will help USPS  increase its shipping revenue by 10 percent and reduce the decline in its  mailing revenue to 3 percent in fiscal year 2013. USPS plans to complete  a multiyear revenue plan in the spring of 2013 that will include details on  its competitive strategies.
We have previously reported that making progress toward financial  viability would require USPS to take steps to cut costs and increase  revenue within its current legal authority. in postal reform legislation passed in the Senate that would have provided  USPS with the authority to undertake new revenue-generating initiatives  such as offering new nonpostal services and exploring opportunities to  offer services on behalf of state and local governments. We also  previously identified questions we believe are important to consider  before USPS is granted such additional authority,following:
How would USPS finance its nonpostal activities, considering its  difficult financial condition?
Should USPS be allowed to compete in areas where there are already  private-sector providers, and if so, on what terms?
GAO, U.S. Postal Service: Strategies and Options to Facilitate Progress toward  Financial Viability, GAO-10-455, (Washington, D.C.; Apr. 12, 2010).
section_title: USPS Offers 12 Grandfathered Nonpostal Services, 8 Experimental Postal Products, and at Least 4 Discretionary Services for Federal Agencies
subsections: section_title: Nonpostal Services
paragraphs: At the time PAEA was enacted, USPS was offering 12 nonpostal services  that it has continued to offer as a result of these services being  grandfathered by the PRC. Two of these are market dominant services,  including MoverSource (a service whereby the cost of changing a  customer’s mailing address is defrayed through the sale of advertising)  and Philatelic Sales (sales related to the hobby of stamp collecting). The  remaining 10 are competitive services, including USPS’s Passport Photo  Service. In fiscal year 2011, USPS reported to the PRC that it generated  net income totaling $141 million from its 12 nonpostal services and  related products. Appendix I provides additional information about each of  these grandfathered nonpostal services.
section_title: Experimental Postal Products
paragraphs: Since the enactment of PAEA, USPS has received approval from the  PRC to market test a total of eight experimental postal products. Four of  the eight approved market tests are for market dominant products, such  as First Class Tracer, which enables the tracking of First-Class letters  through the mail stream. The remaining four experimental products are  competitive products, including USPS’s Gift Cards—experimental product  to test the feasibility of selling gift cards loaded with a specified sum of  money to consumers who could choose to mail the cards. Four of these  experimental products are an outgrowth of USPS’s stakeholder  discussions on new revenue-generating initiatives and are discussed  further below.
USPS terminated one of the eight approved market tests—Collaborative  Logistics—a test to determine whether there was a market for renting  excess space on USPS’s long-haul delivery trucks. While USPS  considered the market test successful, it did not seek to make  Collaborative Logistics a permanent product. Instead, USPS terminated  the test in September 2011, indicating that its ongoing facility  consolidations had resulted in significant opportunities to reduce  overcapacity and costs within its transportation network. Depending on its  future financial and operational conditions, USPS said it may seek to  introduce this product on a permanent basis in the future. Appendix II  provides more information on each of the experimental postal products for  which USPS has received PRC approval for market testing since the  enactment of PAEA.
section_title: Discretionary Services Performed for Other Federal Agencies
paragraphs: USPS has the authority to perform services for other federal agencies on  a discretionary basis by entering into written agreements with these  agencies. Because any postal officer may enter into such agreements,  and USPS does not have a centralized office responsible for executing or  otherwise tracking these agreements, USPS was unable to provide  comprehensive information on the agreements it currently has. However,  based on our discussions with USPS officials and our review of related  reports, we identified at least four services that USPS performs on a  discretionary basis for federal agencies. For example, USPS collects data  on vacant addresses for the Department of Housing and Urban  Development to use in forecasting neighborhood changes, assessing  neighborhood needs, and measuring the performance of its housing- related programs. USPS also accepts passport applications at over 6,300  post offices nationwide for the State Department. By using USPS’s  extensive network of post offices, the agencies’ agreement is intended to  provide passport applicants with more convenient access to passport  acceptance services than the State Department could provide alone,  particularly in remote U.S. areas. In addition, USPS leases its excess  space, including parking, office space, and roof areas to federal agencies,  including the General Services Administration. Finally, USPS processes  investigations related to equal employment opportunity complaints for  numerous federal agencies.these services.
section_title: USPS’s Efforts to Generate Additional Revenue Include Ongoing and Planned Postal and Nonpostal Initiatives
paragraphs: As of November 2012, USPS was pursuing 55 stakeholder-identified  initiatives that it believes respond to the changing needs of consumers  and businesses and strengthen the relevance of USPS and the mail.
Forty-eight initiatives are extensions of USPS’s existing lines of postal  products and services; three are extensions of grandfathered nonpostal  services; and four are experimental postal products. Forty-five of the  initiatives are ongoing, and are discussed below and in more detail in  appendix IV. Ten are under development and are not discussed.
subsections: section_title: Extensions of Existing Postal Products and Services
paragraphs: Thirty-nine of the 48 initiatives that are extensions of USPS’s existing  lines of postal products and services are ongoing. Examples include:
The reclassification of 6,000 of its post office boxes from market  dominant to competitive in markets with other mail services in fiscal  year 2011. This change allowed USPS to offer post office box  customers additional services such as expanded lobby hours, earlier  pick-up times, and the use of post office locations for street-styled  addressing (e.g., 131 South Center St. #3094, instead of P.O. Box  3094) for an increased fee.
The launch in fiscal year 2012 of the Partner Campaigns—an initiative  in which USPS works with retail partners to increase the public’s  awareness that retail stores also offer postal services. According to  USPS, the Partner Campaigns are expected to increase customer  access to postal products and services.
The launch of 2nd Ounce Free in fiscal year 2012—an initiative that  enables large mailers, such as banks, to send twice as much mail for  the 1-ounce price. According to USPS, this product allows mailers to  use the second ounce for marketing purposes which adds value to  their mailings. For example, a mailer may choose to combine  advertising with its bills and statements. If that advertising leads to the  consumer using return mail, it could lead to greater sales for USPS  and the mailer and slow the decline in the use of First-Class Mail.
section_title: Nonpostal Services and Experimental Postal Products
paragraphs: USPS is pursuing three stakeholder-identified initiatives that are  extensions of its existing nonpostal services. Two of these initiatives are  ongoing, including an effort to allow customers to change their addresses  using mobile devices, which expands the ways a customer can request  address changes through MoverSource. USPS is also pursuing four  stakeholder-identified initiatives involving experimental postal products.  Two that have completed market testing and are ongoing as permanent  postal products are Every Door Direct Mail™, which is designed to make  it easier for small and medium-sized businesses to advertise using the  mail, and Reinvigorate Samples, which is intended to encourage  increased mailings of product samples. Market tests for the two other  experimental postal products—prepaid postage on the sale of greeting  card and a campaign to involve selected companies in direct mail  advertising—are under way.
section_title: Reasons for Pursuing the 55 Initiatives
paragraphs: USPS pursued these 55 initiatives for reasons including revenue  generation and adding value to the mail, among others, as shown in  figure 1. Twenty-four initiatives (44 percent) were pursued solely or  primarily to grow revenue, including a First-Class Package Service for  packages weighing less than 1 pound—the only per-ounce pricing in the  marketplace, according to USPS officials. To grow revenue, USPS also  introduced several options for returning unwanted merchandise more  easily and conveniently. USPS officials could not provide estimates of the  expected net income for all of the 55 initiatives; however, the officials  estimated that 9 of them will collectively generate a net contribution of  about $240 million in fiscal year 2012.
section_title: USPS Did Not Pursue 25 Initiatives because of Financial and Other Reasons, and Believes Additional Statutory Authorities Would Provide Opportunities to Increase Revenue
paragraphs: USPS decided not to pursue 25 additional stakeholder-identified  initiatives because of financial and other reasons. Specifically, 12 of 25  initiatives, or 48 percent, were abandoned because of financial reasons.  For example, USPS decided not to offer online Identity Management  Services to educate customers about how to protect themselves from  identity theft when shopping online. USPS anticipated that the service  also would provide convenient access for purchasing from online  companies pre-qualified by USPS. According to USPS, it abandoned this  initiative because it determined that the initiative would not result in a  return on USPS’s investment. In other cases, USPS determined that  initiatives required too high an initial investment or posed other financial  risks and uncertainties. For example, USPS decided not to pursue a  domestic money-transfer service and a retail bill-payment initiative  because the costs would render these financial services unprofitable at  this time.
USPS decided not to pursue the remaining 13 stakeholder-identified  initiatives for other reasons.
USPS eliminated four initiatives that could be viewed as nonpostal  services because it lacks statutory authority to perform new services  in this area, as discussed further below.
USPS eliminated four initiatives because stakeholders were not  interested in participating in the efforts. For example, USPS wanted to  expand and digitalize its passport services at self-service kiosks in  post offices as a potential means to reduce error and fraud. However,  according to a recent USPS Office of Inspector General report, the  State Department was not interested in participating because, in its  view, the kiosks would not be cost effective. USPS also tried to  partner with the Internal Revenue Service to use personnel at post  office locations to verify the identities of individuals claiming eligibility  for the Earned Income Tax Credit (a benefit for certain individuals who  work and have lower wages). According to USPS officials, there was  limited interest on the part of the Internal Revenue Service because,  as reported by the Office of Inspector General, the Internal Revenue  Service decided to implement an alternative solution.
USPS eliminated two initiatives because it determined that they  required a greater initial commitment of resources than other  initiatives and were therefore of lower priority. For example, USPS  decided not to provide eligible companies with volume-based discount  pricing to increase their use of First-Class Mail because companies  may be unwilling or unable to make the needed investments for the  initiative to work. Instead, USPS officials said they are focusing on  other incentives with lower investment thresholds.
USPS eliminated two initiatives because it determined that they could  potentially damage the trust that customers have in the USPS brand.  One initiative involved opening and scanning a customer’s mail—with  the customer’s permission—to send the mail to them in digital form.  The other initiative envisioned providing companies with tools to  enable them to better target their mailings to consumers.
USPS eliminated one initiative that conflicted with ongoing efforts to  reduce the postal workforce. Specifically, USPS decided not to use its  Human Resource Shared Services Center to offer retirement  management services to other federal agencies, in part, because it  does not currently have sufficient capacity to expand these services.
Figure 2 summarizes the primary reasons cited by USPS for not pursuing  the 25 initiatives.
According to USPS officials, they would like to pursue additional revenue- generating opportunities in three areas—nonpostal services; shipments of  beer, wine, and spirits; and cooperation with state and local  governments—if provided with additional statutory authority. The officials  stated that USPS staff have briefed congressional members and staff  about these areas.interests in publicly available reports, including its March 2010 Action   In addition, they noted that USPS has outlined its  Plan, which lays out the agency’s position on its need for increased  flexibility to offer new and innovative products. USPS also reiterated its  interest in acquiring additional statutory authorities in February 2012  when it issued its 5-year business plan. According to USPS,  opportunities in these three areas could provide significant value to  customers, improve USPS’s financial position, and take full advantage of  its resources and competencies. USPS emphasized, however, that  additional innovations in these areas will not be sufficient to solve USPS’s  dire financial situation. Results will also be constrained by the economic  climate and by changing use of the mail.
section_title: Concluding Observations
paragraphs: USPS’s financial viability is dependent not only on cutting costs, but also  generating additional revenues. USPS generated a net income of $141  million in 2011 from its offerings of nonpostal services and products.  While beneficial, this income pales in comparison to USPS’s net loss of  $15.9 billion in 2012. To address its deepening fiscal crisis, USPS  believes that additional services and products in three areas—including  nonpostal services, shipments of alcoholic beverages, and cooperation  with state and local governments—could generate some additional  revenue; however, additional statutory authority is needed. Legislation  was introduced to improve USPS’s financial condition. The legislation  included increased flexibilities to allow USPS to offer new products;  however, Congress was unable to reach overall agreement on the steps  needed to sustain and transform USPS. We continue to believe action to  address the long-standing challenges that hinder USPS’s financial  viability, including a consideration of options to expand its revenue- generating potential, remains necessary.
section_title: Agency Comments
paragraphs: We provided a draft of this report to USPS for review and comment.  In its  written comments, reprinted in appendix V, USPS stated that its financial  viability is dependent not only on cutting costs but also generating  additional revenue.  USPS also provided technical comments which we  incorporated, as appropriate.
We are sending copies of this report to the appropriate congressional  committees, the Postmaster General, and other interested parties. In  addition, the report will be available at no charge on GAO’s Web site at  http://www.gao.gov.
If you or your staff have any questions regarding this report, please  contact me at (202) 512-2834 or stjamesl@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. GAO staff who made key contributions to  this report are listed in appendix VI.
section_title: Appendix I: USPS’s Grandfathered Nonpostal Services
subsections: section_title: Grandfathered nonpostal service (first year offered)
paragraphs: MoverSource is a program involving USPS’s change-of-address orders.  The program is offered through a multiyear alliance between USPS and  Imagitas—a subsidiary of Pitney Bowes—and provides USPS customers  with, among other things, a form for requesting address changes;  confirmation of the change; and mailings containing move-related tips,  advertising, and offers. The revenue and cost of the program are shared  between USPS and Imagitas. USPS also receives a share of the $1 fee  collected for each internet change-of-address order. In addition, the  mailings generate postage revenue for USPS that is not shared.  According to USPS, the MoverSource program adds value to the change- of-address process, while defraying its annual costs for processing these  changes. USPS typically processes about 40 million change-of-address  orders annually, of which about one-third are processed online.  USPS sells a wide-range of stamps and stamp-related items to customers  involved in the hobby of stamp collecting. Examples of philatelic items  include first day covers, ceremony programs, uncut press sheets, framed  stamps, binders for storing stamps, and philatelic guides. USPS satisfies  its orders for philatelic items through two fulfillment channels—retail  outlets and USPS’s Stamp Fulfillment Services. Selected philatelic items  are available at USPS retail facilities, but most are sold through USPS’s  Stamp Fulfillment Services via USPS.com®, the USA Philatelic catalog,  phone, and fax. In May 2012, the price of these items ranged from less  than a dollar for the first day cover of the Common Tern bird stamp to  $1,440 for a sheet of American Wigeon duck stamps. (0.7 million)
In exchange for a portion of revenue generated, USPS provides its  website customers with access to other companies (affiliates) that also  provide mailing services and products. USPS’s website currently hosts  hyperlinks to three affiliates—Cardstore, Click2Mail, and  PremiumPostcard—under agreements styled as affiliate marketing  arrangements. According to USPS, affiliate arrangements provide  customers with increased access to, among other things, postal products  and services and generate revenue for USPS through affiliation fees,  increased website traffic, and additional postage sales. According to  USPS, its affiliate website agreements are actively managed by both  parties. As a result, the parties meet monthly and discuss marketing goals  and objectives to increase the parties’ revenue and website visits.   This program is similar to the one described immediately above, except  that USPS does not actively manage these affiliate arrangements.  USPS’s website currently hosts hyperlinks to three such affiliates—Start  Sampling, My Savings, and Maponics—which provide customers with  products and services ranging from free samples and coupons to maps.  According to the Postmaster General, USPS’s agreements with these  affiliates can be viewed as leases of USPS’s “virtual real estate.” “Linking  only” affiliates pay either a flat fee (i.e., “cost per click” as in the case of  Start Sampling and My Savings) or, in the case of Maponics, share a  portion of the revenue with USPS for having a link to its website.
section_title: No. 5
paragraphs: Grandfathered  nonpostal service  (first year offered)  Electronic Postmark®  (1995)
Description  Electronic Postmark is a web-based security program that enables  customers, using authorized service providers under license with USPS,  to detect whether documents or files time stamped with an electronic  postmark have been altered since the postmark was applied. Authorized  providers generate the “timestamp” (the postmark) on secure servers that  they own and maintain. Providers pay a quarterly fee for this service, with  additional fees for usage above a certain threshold. In 2010—the last  year in which USPS sold this service to a provider—the quarterly fee was  $75,000 per provider for up to 1.5 million electronic postmarks and $0.02  for each additional postmark.   This nonpostal service involves a non-exclusive lease agreement  between USPS and FedEx, which for a fee, allows FedEx to place its  drop boxes at USPS post offices. In September 2012, there were about  4,870 of these boxes located at USPS retail facilities. According to USPS,  all responsibilities related to the installation, maintenance, collection, and  removal of the drop boxes reside with FedEx.   This program is similar to No. 9 below, except that it involves the sale of  postal branded merchandise through other (nonpostal) channels. In fiscal  year 2012, USPS had about 20 licensing agreements with third-party  vendors for their use of USPS’s intellectual property on thousands of  products including apparel, fashion accessories, cards and stationery, pet  products, toys and games, and other types of consumer products. USPS  charges a nominal fee ($25) for the use of its trademarks or copyrighted  material for noncommercial or limited commercial purposes. However, it  negotiates the price for its licensees’ use of patents, and other intellectual  property involving more extensive commercial purposes. According to  USPS, it manages its licensed products by, among other things, requiring  licensees to obtain advance approval for USPS-branded products,  imposing quality control standards, and policing product use and  promotion.  USPS has a variety of agreements with private, nongovernmental entities  to lease excess USPS space, including parking, office, warehouse space,  and land. For example, USPS leases its rooftop space and excess land to  advertisers and cellular providers for billboards and antenna towers. In  fiscal year 2012, USPS had about 600 lease agreements with  nongovernmental entities. The parties negotiate the price of the lease,  which vary by agreement.  USPS licenses its intellectual property, including its postal trademarks  and stamp images, to parties who use these images on merchandise that  USPS sells in its post offices and on its website. (The program involves  the actual sale of the licensed retail merchandise—not the royalty  payments that USPS receives for licensing its intellectual property to  these parties.) In fiscal year 2012, USPS had 150 licensing agreements  with third-party vendors for their use of USPS branded items such as  weight scales, stamp dispensers, teddy bears, passport holders, framed  artwork, and key chains. In September 2012, prices for these products  ranged from $1.30 for reflective mailbox stickers to $134.99 for framed  art.  USPS produces and sells passport photos to individuals for a fee of $15  at more than 5,000 USPS passport application acceptance sites.
section_title: Grandfathered nonpostal service (first year offered)
paragraphs: Description  USPS offers self-service photocopying services at about 2,540 of its retail  facilities. In some locations, photocopiers were installed by commercial  vendors under contracts with USPS. The remaining machines were  installed by USPS. In September 2012, USPS charged a fee of between  $0.10 to $0.50 per page for copying.  USPS rents excess facility space and services at its two training facilities  to outside parties. The facilities include meeting rooms, housing, and  exercise areas. Available services include (1) conference-related services  such as food and the rental of audio-visual equipment, and (2) hospitality- related services such as lodging, fitness-related services, banquet  services, and the onsite sale of sundries. USPS contracts with a company  to manage each of the facilities. Management companies set the price for  the services provided and USPS receives a negotiated percentage of net  profits.
Subtotal: Nonpostal competitive services.  Total: All nonpostal services.
section_title: Appendix II: USPS’s Approved Market Tests for Experimental Postal Products, as of November 30, 2012
subsections: section_title: Name and anticipated timeframe for market test, at approval
paragraphs: Alternate Postage removes a step in the  mailing process because it enables  consumers to send greeting cards without  affixing postage. According to USPS, the  alternate payment method makes it easier  and more convenient for customers to  purchase and mail cards because they do not  have to determine and affix the proper  postage before mailing. Instead, the cost of  postage is included (prepaid) in the price  consumers pay for the card. To participate, a  company must produce and distribute  greeting cards with envelopes bearing  barcodes and other USPS specified markings  that allow USPS to identify each envelope in  the mail stream. Participating companies pay  USPS in two steps. First, USPS receives 50  percent of the postage revenue when the card  is sold to consumers (or distributed to third- party vendors)—even if the card is not mailed.  Second, companies must pay USPS for the  postage for cards that USPS determines were  actually mailed.
Every Door Direct Mail–Retail was a test that  used simplified addressing, entry, pricing and  payment options to entice small and medium- sized businesses to advertise to consumers  within their neighborhoods.  By making  advertising through the mail (direct mail) less  costly and complex, USPS hoped to attract  new mail customers and/or increase its mail  volume and revenues from existing small- volume business mailers. The test had  several features. For example, USPS allowed  small and medium-sized businesses to send  up to 5,000 mail pieces per day at a reduced  cost (14.2 cents per piece). USPS also  reduced the complexity of the mailings by  allowing the businesses to prepare their mail  using simplified addressing, such as “Postal  Customer,” which eliminated the need to  purchase mailing lists and print specific  addresses on each of their mail pieces. In  addition, USPS made it more convenient for  these businesses to enter mail into the  mailstream because it allowed them to bring  their mailings to their local post office instead  of to a mail-processing plant that may not be  conveniently located. Finally, USPS waived all  permitting and mailing fees for the  businesses’ mailings.
Revenue:  According to USPS, revenue for  this product has continued to grow and, as  of October 2012, surpassed $2 million per  week at its retail locations. USPS  estimates this product will result in $55  million in revenues in fiscal year 2012 and  $100 million in revenue in fiscal year 2013.
section_title: No. 3
paragraphs: Name and  anticipated  timeframe for market  test, at approval  Mail Works Guarantee  (~June 2011 to       ~May 2013)
Description  This test was aimed at demonstrating the  effectiveness of direct mail advertising  campaigns to 16 of the country’s “top”  advertising companies. According to USPS,  these companies spend $90 billion annually  for advertising on all media, but spend  approximately $3 billion (about 3 percent)  advertising through the mail. Consequently, in  requesting the PRC’s approval for the market  test, USPS stated that it saw “huge potential  revenue” if USPS could involve these  companies in direct mail advertising  campaigns using First-Class and Standard  Mail. To qualify for the test, a company must  spend at least $250 million on advertising  annually, but allocate less than 1 percent of  its total advertising budget to direct mail.  In  addition, it must mail 500,000 to 1 million  pieces of First-Class Mail or Standard Mail  during a direct mail campaign. Participating  companies would be required to pay normal  postal rates for their mailings, but receive a  postage back guarantee (i.e., a credit to their  USPS account of up to $250,000) if a direct  mail advertising campaign fails to achieve its  goal. ≤10 million  Ongoing, but unlikely to be successful.  As  of November  30, 2012, USPS had not yet  found any companies interested in  participating in the market test. According  to USPS, the test is not likely to be  successful because its incentives for  program participation “were not sufficient  to cause customers to change their  behavior.”  While the test has not been  successful thus far, USPS said it is  continuing to solicit participation from large  companies with multi-million dollar  advertising budgets that do not currently  use the mail as part of their advertising  mix.  In addition, USPS is exploring  revisions to the test’s participation  requirements to help attract customers.   On January 8, 2013, USPS filed to  terminate the Mail Works Guarantee  market test with the PRC.  Revenue:  None.
This test product is designed to satisfy the  needs of consumers who want to track their  First-Class letters through the mail stream.  Specifically, the product allows customers to  purchase and affix a barcode label, tracing  number, and a code which, collectively,  enable them to track the status (excluding  delivery confirmation) of their First-Class  mailings on USPS’s website. According to  USPS’s request for the test’s approval, USPS  expected to sell the tracing labels in packages  of 5 and 10 and to sell the packages at  differing prices—ranging from $0.99 to $2.99  depending on the quantity and location—to  test customer acceptance at 50 retail postal  locations in the Washington, D.C.,  metropolitan area. ≤10 million  Ongoing.   According to USPS, while this  test was not expected to conclude until  November 2013, the First-Class Tracer  had sold out at most of its participating  retail locations as of mid-October 2012.  Revenue: According to USPS, this product  generated $3,065 in revenue though mid- October 2012.
section_title: Name and anticipated timeframe for market test, at approval
paragraphs: Collaborative Logistics—the first experimental  market test offered under PAEA—was  initiated to reduce excess capacity in USPS’s  highway transportation network. According to  USPS, its utilization of vehicles across this  network varied by day of week, time of month,  and season. As a result, USPS sought to  optimize its network of purchased highway  transportation by reselling available space on  its contractors’ trucks. During the course of  the test, USPS resold, on a space-available  basis, truck space to six customers for  shipments that were required to be loaded on  pallets. The loads were delivered to large  postal processing facilities and picked up at  large downstream postal facilities.  USPS  negotiated the price with each customer  based on a variety of factors, including the  customers’ required service standards  ≤10 million  Terminated in September 2011.  USPS  views this market test as successful, but  did not seek to make it a permanent postal  product despite its original intention to do  so. Instead, USPS terminated the test in  September 2011, indicating that it had  reevaluated its plans. USPS explained that  its ongoing facility consolidations had  resulted in significant opportunities to  reduce overcapacity and costs within its  transportation network. Depending on its  future financial and operational conditions,  USPS said it may seek to introduce this  product on a permanent basis sometime in  the future.   Revenue: According to USPS, this product  generated about $2.1 million over the  testing time frame.
Samples Co-Op Box was a 1-week test  mailing of parcel boxes containing an  assortment of samples, such as beauty,  health, and snack products, from various  packaged goods companies. USPS partnered  with a company to prepare and mail the boxes  and to conduct market research, and USPS  delivered the boxes to consumers in targeted  demographic areas without charge. According  to USPS, while product samples provide an  effective way for companies to build brand  awareness for their products, the volume of  samples sent through the mail has declined in  recent years. Consequently, this test was  intended to, among other things, explore ways  to increase sample mailings that, according to  USPS, offered “the potential for millions of  dollars” of additional postal revenue. Another  purpose of the test was to obtain information  about the cost-effectiveness of the program  and its value to product manufacturers and  consumers.
section_title: No. 7
paragraphs: Name and  anticipated  timeframe for market  test, at approval  Gift Cards (~May 1,  2011 to ~April  30,  2013)
Description  This market test allows customers to  purchase gift cards loaded with a specified  sum of money that may be sent through the  mail.  According to USPS, the sale of gift  cards at selected retail postal locations  increases customer convenience and  enhances postal revenue by encouraging  customers to use the mail for gifting purposes.  USPS activates the card and earns a  negotiated percentage of each card’s  activation fee. The remainder of the fee is  remitted to the issuer of the card. In its  request for approval of the market test, USPS  indicated that it intended to enter into an  agreement with one or more card providers.   USPS also indicated that it might test different  activation fees, which typically range from  $3.95 to $5.95 depending on the value and  type of the gift card. ≤10 million  Ongoing. USPS entered into an agreement  with American Express and currently offers  this vendor’s gift cards at about 5,200  USPS retail locations.  The test is  expected to be completed by May 2013.   Revenue:  According to USPS, this  product generated $96,000 in revenue  during fiscal year 2011 and is expected to  generate about $1.1 million during fiscal  year 2012.
Metro Post is a same-day delivery service for  local buyers who purchase products from  participating online e-commerce companies  (and associated retailers) in selected  metropolitan areas.  According to USPS, it  anticipates entering into relationships with up  to 10 online e-commerce companies over the  course of the market test.  Metro Post is  intended to test the operational feasibility of  same-day package delivery to/from multiple  locations and to help USPS determine the  optimal pricing structure for the service.
Ongoing. PRC approved the market test  for Metro Post on November 14, 2012.  USPS selected San Francisco as the first  city for testing.  The market test began on  December 17, 2012.  Revenue: Not yet available.
section_title: Appendix III: Examples of Services USPS Currently Performs on a Discretionary Basis for Federal Agencies
subsections: section_title: No. 1
paragraphs: Description  Pursuant to an interagency agreement between USPS and the State Department and authorities  granted under 39 U.S.C. § 411 and 31 U.S.C. § 686. USPS is authorized to accept passport  applications on behalf of the Department. Under the terms of the most recent agreement (2000),  trained USPS personnel, among other things, review each passport application for completeness,  record pertinent information about the identification the applicant used, collect fees, and send the  completed application to the State Department. USPS retains a portion ($25) of the collected fees in  the form of an execution fee. In fiscal year 2011, USPS accepted approximately 5.6 million passport  applications in over 6,300 post offices nationwide. According to USPS, the applications generated  net income of $43 million for the period. By using USPS’s extensive network of post offices, the  agreement is intended to provide passport applicants with more convenient access to passport  acceptance services than the State Department could provide alone, particularly in remote U.S.  areas. According to the interagency agreement, either party may terminate the agreement, without  liability, with 180 days advance notification to the other party.
Through various interagency agreements and under authority granted by 39 U.S.C. § 411, in 2006,  USPS began conducting EEO investigations on behalf of other federal agencies. According to USPS  officials, USPS initiated this service to generate additional revenue. In addition, USPS believed that  given its extensive experience in this area, it could use its existing contractor workforce to reduce the  costs and improve the timeliness and quality of other agencies’ EEO complaints processing. Since  2006, 17 federal agencies have entered into interagency agreements with USPS for this purpose. In  fiscal year 2011, USPS’s National EEO Investigative Service Office completed 255 investigations for  9 federal agencies that generated about $558,000 in net income. According to USPS, interagency  agreements can be terminated at any time by the mutual agreement of the parties.
Pursuant to authorities granted under 39 U.S.C. § 411 and a 4-year interagency agreement with HUD,  USPS agreed to provide HUD with data on vacant U.S. residential and business addresses. According  to the agencies’ most recent agreement (September 2011), HUD intends to use this information to  forecast neighborhood changes, assess neighborhood needs, and measure the performance of several  of its programs. HUD agreed to pay USPS $30,000 in 2011 and has options to purchase additional  data over a 4-year period for a total cost of up to $160,000. The parties specified that the agreement  may be terminated for no reason or any reason by written notice to the other party.
In addition to services that USPS performs on a discretionary basis for federal agencies, USPS is  required—either by law or executive order—to perform numerous services on behalf of federal agencies.  For example, the Migratory Bird Hunting and Conservation Stamp Act requires USPS to print, issue, and  sell duck stamps (that serve as hunting licenses) for the U.S. Fish and Wildlife Service. Pub. L. No. 73- 124, 48 Stat. 451 (Mar. 16, 1934). Through executive order, USPS also is directed to deliver medicines  to individuals in the event of a large scale biological attack. Exec. Order No. 13527, 75 Fed. Reg. 737  (Jan. 6, 2010)
section_title: Appendix IV: Description of Ongoing USPS Initiatives, as of November 14, 2012
subsections: section_title: No. Initiative Name First-Class Mai 1
paragraphs: 2nd Ounce Free enables large mailers, such as banks, to send twice as much mail for the  one-ounce price. According to USPS, this product allows mailers to use the second ounce  for operational or marketing purposes which increases the potential value of their mailings.
Alternate Postage Payment removes a step in the mailing process because it enables  consumers to send greeting cards without affixing postage. According to USPS, the  alternative payment method makes it easier and more convenient for customers to  purchase and mail cards because they do not have to determine and affix the proper  postage before mailing. Instead, the cost of postage is included (prepaid) in the price  consumers pay for the card. USPS introduced this product as an experimental product in  January 2011 and, according to USPS, expects to seek its approval as a permanent  product at a later date. Appendix II provides additional information on this product  initiative.
USPS is pursuing a pricing incentive that will offer customers a higher discount for sending  First-Class Mail that meets its Intelligent Mail barcode (IMb) requirements. According to  USPS, this initiative supports USPS’s goal of increasing adoption of its intelligent  barcodes that, among other things, enhances USPS’s mail-processing efficiency and  increases its ability to track the location of mail as it moves through the mail stream.
This initiative targets USPS’s largest mailers of First-Class Mail and Standard Mail and is  carried out through negotiated service agreements between the parties. Participating  mailers will receive reduced postage costs if they meet specified volume commitments.  According to USPS, the initiative may be extended to other product categories if it is  successful.
This initiative allows mailers to enhance the “indicia” area (i.e., the postage block area) of  a mail piece with a picture or image, including mobile barcodes. According to USPS, the  images can be used to advertise brands, bring immediate attention to the mail piece, and  potentially improve the rate in which mail is opened.
This initiative represents USPS’s ongoing process to analyze its First-Class Mail product  and service offerings. The analysis is intended to result in, among other things, the  continuous simplification of mail offerings, the optimization of USPS’s First-Class Mail  products in the marketplace, and the elimination of product redundancies. In addition,  USPS hopes to reduce the cost and complexity of its customers’ mailings and identify  gaps between product features and customer needs. According to USPS, the introduction  of its 2nd Ounce Free initiative was a direct result of this effort.
This initiative is intended to increase USPS’s sales of stamps and philatelic products.  Specifically, USPS said it intended to renew its emphasis on properly marketing and  displaying stamps and philatelic products in its retail locations and to expand its Forever  stamp pricing to its collectible stamp program.
section_title: Marketing Mail 8
paragraphs: This promotion ran between November 7-21, 2012, and offered business mailers an  upfront 2-percent postage discount on qualifying mailings. To qualify, the mailings had to  include a two-dimensional barcode that when read or scanned by a mobile device, linked  the recipient to a website for purchasing the advertised product. According to USPS, by  delivering mobile-optimized promotional offers, coupons, and catalogs to customers in  time for the Black Friday-Cyber Monday shopping sprees, the initiative was intended to  spur mobile purchasing.
section_title: No. Initiative Name 9
paragraphs: Description  This initiative involves a series of short-term promotions designed to provide mailers and  marketers with incentives to promote innovative uses of the mail that increase its value to  recipients. In addition, according to USPS, the promotions are intended to accelerate best  practices among marketers and business mailers, while increasing awareness and  engagement among consumers.
This initiative involves activities that support overall USPS efforts, such as those related to  simplifying USPS’s pricing, product lines, and mailing processes. For example, according  to USPS, it is examining its existing discounts for the presorting of customer mailings and  is establishing flexible pricing based on location and capacity in its processing and  transportation networks.
This initiative involved an advertising campaign to promote the value of advertising and  First-Class Mail to business and residential customers. According to USPS, the campaign  ran in the fall of 2011 and centered around two television ads—called “Hacked” and  “Face-to-Face.”
Direct Mail Hub is a USPS internet site designed to educate small business owners,  including many first-time business users, on how to use direct mail to advertise their  businesses to consumers. According to USPS, the site helps small businesses generate  mailings from start-to-finish and complements its Every Door Direct Mail product.
This initiative is intended to respond to the decline in the circulation of newspapers, which  advertisers often use to deliver inserts, such as circulars, to customers. Instead of being  inserted in a newspaper, advertisers can—for example—bundle multiple advertising  leaflets in mailings to consumers. The initiative is carried out through negotiated service  agreements and, as of November 2012, USPS had negotiated one such agreement.
This initiative targets large advertising companies that rely on other media—not mail—to  advertise to prospective customers. Specifically, USPS hopes to demonstrate the  effectiveness of direct mail as an advertising medium. Appendix II provides additional  information on this initiative, which was introduced as an experimental product in June  2011. On January 8, 2013, USPS filed to terminate the Mail Works Guarantee market test with  the PRC.
This initiative offers business mailers a 2 percent postage discount on their qualified  mailings. To qualify, the mailing must contain a two-dimensional barcode or print/mobile  technology that can be read or scanned by a mobile device. According to USPS, the  initiative is designed to encourage marketers to incorporate a “Mobile on Mail” multi- channel marketing approach that uses mail as the gateway for driving e-commerce activity  and transactions.
This initiative involves a potential enhancement to MoverSource—a program for changing  a mail recipient’s address. With this initiative, USPS is exploring the feasibility of allowing  mail recipients to use their mobile devices as another vehicle for changing their mailing  address. (USPS currently allows mail recipients to change their addresses via a printed  form, by phone, or online.) Appendix I provides additional information about MoverSource.
This initiative involves an ongoing USPS effort to develop mutually beneficial partnerships  with companies in the periodical industry. According to USPS, as of November 2012, one  topic under discussion involved potentially offering magazine subscriptions through USPS  channels.
Reinvigorate Samples is an effort aimed at increasing the use of mail to deliver product  samples. This initiative is a follow-on to Sample-Co-op boxes that USPS initiated as an  experimental product. Appendix II provides additional information about Sample Co-op  boxes.
section_title: No. Initiative Name 19 Simplified &
paragraphs: Description  USPS introduced Every Door Direct Mail–Retail as an experimental postal product that  used simplified addressing, entry, pricing and payment options to entice small and  medium-sized businesses to advertise to consumers within the businesses’  neighborhoods. By making advertising through the mail (direct mail) less costly and  complex, USPS hopes to attract new mail customers and/or increase its mail volume and  revenues from existing small-volume business mailers. The PRC approved Every Door  Direct—Retail as a permanent postal product in September 2012. Appendix II provides  additional information about this product.
This initiative is intended to make it easier for technology-savvy and mobile customers to,  among other things, order packing supplies, buy postage, print labels, and schedule free  package pickups using USPS’s website and other digital channels, such as smart phone  mobile applications. The increased use of digital channels is intended to provide  customers with greater access to USPS’s products and services.   ePostage is an initiative to provide mobile and technology-savvy customers with greater  access to USPS’s products and services. As part of this effort, USPS has developed  commercial shipping tools that, among other things, provide payment and tracking  services for online retailers. According to USPS, for example, its e-Postage solution is  currently used by one major online retailer.
This initiative involves enhancements to USPS’s portfolio of products and services  targeted toward small businesses. According to USPS, recent enhancements include  Carrier Pickup and Priority Mail Prepaid Forever Flat Rate Packaging. USPS also has  extended its flat-rate-shipping options with Priority Mail and Express Mail padded  envelopes, and upgraded its online Click-N-Ship platform on USPS.com.
This initiative involves the renegotiation of USPS’s Parcel Select contracts to adjust its  pricing for deliveries based on geography. Specifically, USPS adopted a two-tiered pricing  approach—one tier for suburban areas and another tier for rural areas—that is expected  to lead to greater volume and revenue. According to USPS, for example, the contract  changes enable private-sector firms to leverage USPS’s low costs and delivery access to  provide “last-mile services” to their customers.
This initiative involves a First-Class Package Service for packages weighing less than 1  pound. According to USPS, this service provides the only per-ounce pricing in the  marketplace.
This initiative is to better align USPS pricing with market demand and USPS costs.  The  Postal Accountability and Enhancement Act of 2006 required USPS’s market-dominant  products to cover their costs and any price increases for these products must be tied to  the rate of inflation. For example, USPS moved Parcel Post®—previously an unprofitable  market-dominant product—to its competitive product line. According to USPS, this change  will enable USPS to raise its price for Parcel Post to at least cover the product’s costs. In  addition, the change is expected to benefit USPS’s Priority Mail® products which,  according to USPS, had been disadvantaged because these products were previously  competing against the unprofitable Parcel Post service.
This initiative is intended to help USPS compete for a larger share of the parcel shipment  business. Specifically, USPS developed a marketing plan to communicate the benefits of  its products, services, and initiatives through multi-channel marketing campaigns.  According to USPS, one feature of the plan involves reminding customers about the  benefits and features of existing shipping options which it hopes will “continue to position”  USPS as the “shipper of choice” for businesses.
Description  USPS plans to give shippers greater control of their packages by, among other things,  enabling them to request that a mail piece be returned or redirected before final delivery to  the recipient. For example, Hold For Pickup permits a package to be shipped directly to a  Post Office and held until picked up. Other ancillary services include Adult Signature  Required and Adult Signature Restricted Delivery, which are designed to satisfy security  and privacy concerns for shipments that by law require an adult’s signature.
This initiative provides customers with various self-service returns options, such as the  ability to print shipping labels that make it easier and more convenient to return  merchandise through the mail. According to USPS, the introduction of these “return-on- your-own” options is intended to make USPS the preferred channel for business-to- consumer returns.
This initiative involves an expansion of USPS’s offerings of free packaging supplies to  increase customer convenience and support growth of its expedited shipping products.
section_title: Access to USPS Products and Services 30 Business Mail
paragraphs: The initiative involves the introduction or improvement of various processes USPS uses to  accept business mail for processing, including processes that verify and track the  mailings. In addition, USPS intends to upgrade its infrastructure to allow electronic data on  mailings to be stored at designated local sites (in addition to the centralized database) to  address the possibility of network outages.
Increase  access, grow  revenue  31  Business Mail Entry  This initiative involves the introduction of online resources and streamlined processes  intended to make it easier for mailers to prepare and enter their mail into the mail stream.
This initiative involves the 400 field employees who provide day-to-day assistance to  USPS’s 27,000 commercial customers throughout the country. According to USPS, in  addition to customer service, these employees also establish relationships with its  customers’ key decision makers.
USPS is exploring new tiered pricing structures that would allow customers to earn  additional mailing discounts once they exceed specified revenue or volume thresholds.
USPS plans to in-source its customer call-in center in an effort to improve customer  service and increase the likelihood of customers purchasing postal products. According to  USPS, this is a high priority initiative which is required under the terms of its latest contract  with the American Postal Workers’ Union. USPS said the call center will begin operations  in the fall of 2012 and ramp up its operations through the spring of 2013 to meet its  contractual commitment to have 1,100 union employees assigned to call center operations  by May 2013.
USPS is developing and expanding its line of retail products, such as greeting cards,  promotional and mail related products, and tote bags. All of these products are aimed at  extending postal branding in the marketplace, cross promote core postal products, and  improve the overall shopping experience.
This initiative targets small business customers that, according to USPS, are looking for  increased convenience from their post office boxes. Specifically, USPS reclassified 6,000  of its post office boxes from market dominant to competitive products in markets with other  mail services in fiscal year 2011. This change allowed USPS to offer post-office-box  customers additional services such as expanded lobby hours, earlier pick-up times, and  the use of post office locations for street-styled addressing (e.g., 131 South Center St.  #3094, instead of P.O. Box 3094) for an increased fee.
section_title: No. Initiative Name 37
paragraphs: Description  This initiative was designed as a communications campaign built around the theme that  USPS is “Everywhere I Am” with “I” being the customer. USPS is pursuing this initiative as  an alternative access communications effort. According to USPS, this theme is extremely  important to customers who are mobile and tech savvy, and therefore, not afraid to use  remote postal locations to do business.
USPS is pursuing licensing opportunities, particularly opportunities that will promote its  stamp program. According to USPS, its licensing efforts have two goals. First, by  controlling the use of its postal trademarks, USPS said it protects its brand and ensures  that its good name is not harmed by indiscriminate use of its trademarks. Second, USPS  said it has a very valuable collection of American art as part of its stamp image library and  that private sector organizations want to leverage the collection for their endeavors.  According to USPS, licensing this art helps defray its costs and helps support its stamp  program. Appendix I provides additional information about USPS’s licensing activities.   39  Partner Campaigns  This initiative involves working with retail partners to increase awareness of the retailers’  stores as locations where customers can obtain postal services.
This initiative focuses on improving customer service at USPS’s retail facilities. For  example, USPS plans to test different approaches and staffing options to improve  customer experience and reduce customer wait time at its retail facilities. In rural America,  USPS is adjusting service to local demand through its use of Village Post Offices and  changes to its hours of facility operations.
According to USPS, it plans (over the next 5-10 years) to shift the majority of its retail  volume from USPS-owned facilities to retail partners and stamp partners via its Retail  Partner Expansion Program. This program will establish regional and national contracts  that will allow select retailers to provide USPS products and services to their customers.  According to USPS, the program will increase customer access to USPS products and  services more rapidly and at a lower cost than would be possible through existing  channels. In addition, USPS believes that the program will increase its market share and  create a substantial retail platform for introducing new USPS products and services in the  future, among other benefits.
This initiative seeks to substantially increase USPS’s revenue from political mail.  Specifically, USPS hopes to generate $500 million in revenue in fiscal years 2012 and  2013 through a major sales and marketing effort. According to USPS, such an increase  would double the revenue it received during the previous election season.
This initiative is intended to increase customer access to self-service postal options which,  according to USPS, will substantially lower its costs and improve its customers’  experience, among other benefits. Specifically, USPS plans to install self-service kiosks in  about 2,500 high-traffic USPS facilities to emphasize self-service as the optimal channel  for accessing postal services.
This initiative involves realigning USPS’s sales staff to build relationships with its largest  customers. USPS expects over $60 million in incremental revenue as a result of this  realignment in 2012.
As part of its effort to grow revenue, personnel at post offices are attempting to increase  their sales of expedited packaging and extra services through a concerted sales effort.
section_title: Appendix V: Comments from the United States Postal Service
section_title: Appendix VI: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
paragraphs: Lorelei St. James, (202) 512-2834 or stjamesl@gao.gov.
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Kathleen Turner and Heather  Halliwell (Assistant Directors), Tonnye Conner-White, Delwen Jones,  Steve Martinez, Josh Ormond, James Russell, and Crystal Wesco made  key contributions to this report.