U.S. Postal Service: Expanding Nonpostal Products and Services at Retail Facilities Could Result in Benefits, but May Have Limited Viability
Released: 2020-03-10T00:00:00

Letter

Background

USPS is required to provide postal services “to bind the nation together through the personal, educational, literary, and business correspondence of the people prompt, reliable, and efficient services to patrons in all areas and postal services to all communities.” To help fulfill this mission, USPS has developed a network of facilities that provides access to retail services and supports postal collection, processing, transportation, and “last mile” delivery of mail—functions that are generally co-located. The retail portion of these facilities includes public areas where USPS provides customers with retail services. The public areas can include full service counters where employees assist customers, self-service areas, and post office boxes. The non-public portions include features such as workrooms, where mail processing occurs, and employee support areas, such as lunch tables and lockers.

Although USPS data show that customer visits and transactions have declined over the past 5 years, the size of USPS’s retail network has remained largely unchanged during that period (see fig. 1).

We have previously reported that USPS has made some efforts to reduce the number of its retail facilities to align with the significant decline in mail volume and address rising costs. Several factors, however, have limited USPS’s ability to make further reductions. For example, in 2011 USPS moved to evaluate the potential closure of almost 3,700 retail facilities but abandoned their effort due to stakeholder concerns. Instead, USPS explored options to adjust its retail service without closing offices. Legal restrictions also limit USPS’s ability to close retail facilities. For example, USPS cannot close a small post office solely for operating at a deficit. If USPS wishes to close a retail facility, among other steps, it must take into consideration not only the economic savings but also the effects on the communities served, its employees, and the services provided, and it must provide customers with at least 60 days’ notice before the proposed closure date.

Federal statute defines the types of services that USPS may and may not provide. As previously noted, PAEA placed limitations on the nonpostal products and services USPS could provide. In particular, it allowed USPS to continue to provide nonpostal products and services that were both offered as of January 1, 2006, and were permitted by PRC to continue. While PAEA generally prohibits USPS from initiating new nonpostal services, USPS uses a separate statutory authority to provide such services to federal executive agencies. If a nonpostal service is to be provided to a federal executive agency, generally, USPS and the parties must specify the terms and conditions of their collaboration, including the activities to be performed by USPS and the terms of reimbursement, if applicable. USPS is currently not authorized to provide nonpostal services to state or local entities.

USPS may also lease excess space at retail facilities—including parking, office space, and roof areas—to other entities at both the facilities that USPS owns and those it leases from other entities. USPS officials said some leases give them the right to sublease space at leased facilities, but the officials did not know how many facilities where USPS had such rights. USPS collaborates with the GSA, which is the nation’s largest public real-estate organization, to lease space to other federal government entities. USPS works with a real estate firm to lease space to private or other entities, such as to state and local government entities.

USPS’s Retail Facilities Are Not a Major Contributor to Its Costs and Revenues but Provide Benefits Retail Facilities Account for a Relatively Small Percentage of Costs and Revenues and Are Profitable Overall

According to USPS’s analysis, retail facilities accounted for a relatively small portion—about $5.17 billion, or 7.1 percent—of USPS’s modified operating costs in fiscal year 2018. (See fig. 2.)

Personnel costs accounted for the majority of retail facility operating costs ($4.87 billion), including nearly $4.4 billion in employee compensation.

Non-personnel costs amounted to about $0.30 billion, which included rent ($0.09 billion), utilities ($0.06 billion), and depreciation and amortization ($0.15 billion).

In terms of revenue, according to USPS’s analysis, retail facilities accounted for a relatively small portion—about 15 percent ($10.5 billion)—of USPS’s total revenue ($70.6 billion) in fiscal year 2018. As shown in figure 3, postage meters and validation and walk-in stamp sales generated most of that revenue.

In fiscal year 2018, the majority of retail facilities were profitable (see fig. 4), with some considerations. USPS’s analysis showed that the total retail revenue generated at retail facilities was more than double retail facility costs in fiscal year 2018. However, over a third of retail facilities did not generate enough revenue to cover USPS’s retail costs. In particular, over half of the rural facilities were unprofitable, while the overwhelming majority of suburban and urban facilities were profitable. Overall, we found that of the unprofitable facilities, 89 percent were located in rural areas. Among the 10 most unprofitable facilities, though, 5 were in urban areas and 3 were in suburban areas. USPS officials told us some of these unprofitable urban and suburban retail facilities were in areas where rent, utilities, and maintenance were very costly, and the revenue generated was not enough at those facilities to make them profitable.

Finally, while the number of customer visits to retail facilities has declined by 25 percent since fiscal year 2009, customers are still using them. In fiscal year 2018, among the retail facilities for which USPS had data, the average number of customer visits was 46,624 annually, or an average of 154 visits per day. The most unprofitable facilities averaged 31,731 customer visits in fiscal year 2018, or about 105 customer visits per day.

Stakeholders Cited Several Non-Revenue Benefits of Retail Facilities

According to studies we reviewed and USPS officials and two consumer groups we interviewed, USPS’s retail facility network produces economic, social, environmental, and civic benefits (see table 1).

Some postmasters who responded to our survey told us that their retail facilities generated economic and social benefits. For example, 90 percent (134 of 149) of postmasters managed a retail facility within walking distance of other businesses or community buildings. Of those, about 31 percent (41 of 134) of postmasters indicated that the retail facility increased patronage of nearby businesses and community buildings to a great or very great extent. Almost half (71 of 149) of the postmasters stated that their retail facility served as a place for residents to interact in person to a great or very great extent.

The economic and social benefits may benefit rural communities more than urban and suburban areas, according to our survey of postmasters, as well as the reports we reviewed and stakeholder interviews. One survey respondent stated: “Offices in rural communities are extremely important to the area in which they serve. Postmasters are often town leaders and hold various positions on councils, boards, and non-profit organizations. The USPS is usually the only government office in the community, and it is recognized by many as their only connection to the outside world.” According to USPS OIG and representatives from the two consumer groups we interviewed, retail facilities serve as a gathering place and help build social identity and connectivity, especially in rural areas. According to USPS, small business owners depend on access to USPS retail facilities across the country and in rural areas since USPS facilities are often the only retail shipping provider. In addition, according to USPS, retail facilities play important roles in connecting rural communities.

USPS’s Nonpostal Retail Activities Generate Some Revenue and Offer Other Benefits USPS’s Nonpostal Products and Services Account for a Small Percentage of Retail Revenue and Are Mostly Profitable

USPS has offered a variety of nonpostal products and services since 2008 (see table 2). As previously described, PAEA permitted USPS to continue offering certain nonpostal products and services that were approved by PRC, and did not alter USPS’s statutory authority to provide nonpostal services to federal executive entities. The nonpostal products and services we identified were either permitted to continue by PRC pursuant to PAEA or are services USPS provided through partnerships with other federal government entities, such as those made through interagency agreements.

USPS chooses where to offer its nonpostal products and services based on several factors, and as noted in table 2 above, USPS does not offer each nonpostal product and service at all retail facilities. USPS officials told us they determine where to offer nonpostal products and services based on several factors, such as customer demand and analysis of the potential to generate revenue. In some cases, USPS consults with other entities to make these determinations. For example, USPS officials told us that the company that supplies the greeting cards conducts market research to determine locations where there is demand. For passport services, USPS and U.S. Department of State officials determine locations based on demand and whether retail facilities have adequate staff to perform related functions, among other factors.

USPS collects a fee for some, but not all, of the identified nonpostal products and services offered at retail facilities. According to data from USPS’s revenue and cost analysis, nonpostal products and services generated a small amount of the total revenue collected at retail facilities—about $431 million in fiscal year 2018, which accounted for 4.1 percent of total retail facility revenue, and 0.6 percent of USPS’s total revenue. As figure 5 shows, passport applications and photo services, as well as money orders, accounted for the greatest percentage of revenue.

Nonpostal products and services may also generate revenue from additional transactions that are made by customers during their visits to obtain these offerings. For example, in 2016, USPS OIG estimated that USPS generated almost $6.6 million in fiscal year 2015 from individuals purchasing money orders to pay for passport-related services. In addition, USPS OIG reported that passport services increased foot traffic at retail facilities. A representative from a postal employee union also told us that nonpostal products and services offered at retail facilities can drive increased foot traffic in post office lobbies.

USPS officials said that USPS incurs various costs for nonpostal products and services related to (1) the time it takes mail clerks to perform transactions; (2) equipment and materials, such as passport photo equipment for passport photo services; and (3) any needed physical changes to the facility. USPS is required to analyze whether revenues cover costs for some of the identified nonpostal products and services, but not all. USPS officials said they are not required to report on whether revenues cover costs for services provided through federal interagency agreements, such as passport application processing. In addition, they told us they do not track the costs for offerings that are considered to be “non-commercial, non-revenue generating services,” such as community bulletin boards. USPS officials also said some of the nonpostal products and services we identified do not incur any costs; for example, greeting and gift card displays are provided at the vendor’s expense.

While USPS does not track costs for all offerings and make all costs publicly available, USPS reported that most of the nonpostal products and services we identified (as shown in table 2), and for those that USPS tracks costs, generated more revenue than costs in fiscal year 2018. Specifically, USPS reported that money orders earned almost $12 million and philatelic sales earned about $1.1 million in revenue above their costs in fiscal year 2018. USPS reported the only nonpostal product or service that did not cover its costs in 2018 was in-bound international money transfers.

USPS Initiated Pilots to Provide Services for Other Federal Entities at Retail Facilities

Based on our discussions with USPS officials, we identified three pilots USPS has conducted since 2008 to provide nonpostal services on behalf of other federal government entities at retail facilities; two of these pilots involved USPS mail clerks performing in-person identity proofing and biometric capture and one of the pilots involved sharing retail facilities’ lobby space.

USPS and the U.S. Census Bureau (Census Bureau) conducted a pilot to evaluate the feasibility of having USPS assist the Census Bureau with nationwide hiring for the 2020 Census. For this pilot, which lasted from March 2015 to July 2015, USPS mail clerks at 12 retail facilities used Census Bureau equipment to conduct in-person identify proofing and other administrative processes to help hire temporary Census Bureau employees.

USPS and the Federal Bureau of Investigation (FBI) began a pilot in September 2018 in which USPS mail clerks began scanning and sending the fingerprints of individuals participating in the FBI’s Identity History Summary Checks—a program that enables individuals to request their arrest and conviction records (see fig. 6).

USPS and the Census Bureau conducted a pilot from April 2018 to July 2018 as part of the Census Bureau’s 2018 testing activities to determine whether interactive kiosks could be used at retail facilities to allow customers to fill out their Census questionnaire. USPS installed kiosks at 30 retail facilities in Providence County, Rhode Island, that offered Internet access limited to the Census Bureau’s online questionnaire.

According to officials from the Census Bureau and FBI, the agencies benefited from the three pilots, to varying degrees, and USPS generated revenue from the two in-person proofing and biometric capture pilots.

USPS officials told us that they received $125,000 from the 2015 in- person proofing pilot with the Census Bureau, and Census Bureau officials said this pilot provided their staff with convenient locations to meet with prospective applicants. Regarding the 2018 kiosk pilot, Census Bureau officials said this resulted in 111 completed questionnaires. However, after the pilots ended, the agencies did not enter into subsequent partnerships. Census Bureau officials told us they did not wish to extend the in-person proofing pilot due to limited funding, and they did not wish to extend the Census kiosk pilot because the number of completed tests did not justify the cost and effort.

For the FBI pilot, USPS had generated almost $425,000 in revenue, as of December 2019, from the fees paid by participating customers since September 2018, according to USPS documentation. FBI officials told us this pilot has improved their customer experience and enabled them to reduce their response time for providing information to customers. In March 2019, USPS and the FBI expanded the pilot from two to 28 retail facilities, and this pilot was still ongoing at the time we published our report.

USPS officials told us they also created the Digital Business Services Team in June 2019 in part to pursue additional revenue-generating partnerships with federal executive agencies. The officials said a major focus of the team was to expand USPS’s in-person identity proofing and fingerprinting services, and they estimated—with certain assumptions regarding acquiring partnerships—fingerprinting services could generate about $87 million in annual revenue after a 5-year rollout. USPS is currently discussing potential new partnerships for in-person proofing pilots with federal government entities.

Stakeholders Reported Non-Revenue Benefits and Few Challenges Related to Current Nonpostal Products and Services Offered

USPS officials, federal government entities, and stakeholders we interviewed and postmasters we surveyed told us that the identified nonpostal products and services (as shown in table 2) currently offered at retail facilities provided the following non-revenue benefits.

Enhanced consumer benefits. Access to certain nonpostal products and services at retail facilities enhanced consumers’ convenience, according to USPS officials, and representatives from consumer groups and a postal employee union. For example, in September 2019, USPS analysis found that 32 percent of the FBI pilot customers selected USPS’s fingerprinting services over others who offer similar services due to USPS’s location and rated their satisfaction with USPS’s service highly. A representative from the postal employee union said that many customers are happy that they can purchase a greeting card and gift card when visiting a retail facility. In addition, a representative from one of the consumer groups we interviewed said that some nonpostal products and services, such as international money transfers and money orders, may be otherwise unavailable to certain populations, such as those who do not have access to a bank. This representative also told us that some low-income consumers only have internet access through their phone, which makes it difficult to fill out forms online; these consumers therefore could benefit from having certain forms, such as voter registration and selective service, available at a retail facility.

Enhanced government benefits. Officials from five of the six federal government entities that had partnerships with USPS said their partnerships supported their ability to fulfill their missions, such as by efficiently using resources and increasing customer convenience. For example, officials from all six of these federal government entities said USPS’s extensive network of retail facilities helped them reach customers or users. Also, officials from three of these federal entities told us that USPS’s services cut the processing time for certain applications or services.

Enhanced community benefits. Representatives from the two consumer groups told us that community services offered at retail facilities—such as food drives, school tours, and community bulletin boards—may help sustain communities and increase social connectedness. Postmasters we surveyed also reported ways their communities benefited from nonpostal services provided at their retail facilities. For example, one postmaster we surveyed reported that his or her retail facility collected eyeglasses for a local community organization. Another postmaster we surveyed reported that during the holiday season, his or her retail facility offers decorative rubber stamps, which have become a community tradition.

According to the postmasters we surveyed, some of the nonpostal products provided significant nonrevenue value, although the degree to which these provided value depended on whether the retail facility was located in a rural, suburban, or urban area. We asked postmasters to identify whether certain nonpostal products and services were offered at the selected facility, and if so, how much value the product or service provided to the community.

Overall, passport services were the most highly valued nonpostal product or service. About 95 percent (36 of 38) of postmasters at retail facilities that offered passport services said passports provided great or very great value to their communities.

Money orders were the next most highly valued nonpostal product or service. These were offered at more of the retail facilities selected for our survey than passport services. For the retail facilities that offered money orders, about 78 percent (115 of 147) of postmasters said this product provided great or very great value to their communities.

Burial flags were the third highly valued nonpostal product or service, for some types of locations. About 66 percent (21 of 32) of postmasters managing rural retail facilities and about 70 percent (35 of 50) of postmasters managing suburban retail facilities said burial flags provided great or very great value compared to about 43 percent (9 of 21) of postmasters overseeing urban retail facilities.

Among retail facilities that offered international money transfers (SureMoney), selective service forms, philatelic products, and gift cards, around one-third or more of postmasters reported these as providing some value or little to no value in their communities.

Representatives of one postal employee union, postmasters we surveyed, and officials from the six federal government entities that had partnered with USPS reported minimal challenges related to providing the identified nonpostal products and services at retail facilities. For example, the representative from the postal employee union told us that the only challenge for postal workers was when locations did not have adequate staff to handle passport services. Very few of the postmasters selected for our survey identified challenges related to offering the thirteen nonpostal products and services we asked about. Officials from only two of the six federal government entities mentioned challenges, and none of them were significant in nature. For example, officials from the Department of Veterans Affairs mentioned that the only challenge was ensuring adequate supplies of burial flags at retail facilities.

Although the stakeholders we interviewed and postmasters we surveyed cited few challenges associated with nonpostal products and services, USPS OIG has reported that USPS could take actions to further increase the use of some of these offerings. In 2015, USPS OIG suggested that USPS conduct better-targeted marketing for its money orders or consider pricing changes to the fees charged for money transfers. In 2016, USPS OIG identified several areas in which USPS could improve customer experience for passport services, such as improving the clarity of information provided to customers and improving the accuracy of offerings on USPS’s website. USPS generally agreed with the findings but reported it had already implemented or had begun to implement changes to improve customer service issues raised in report.

Some Revenue Results from Leasing Excess Space, but Opportunities Are Limited

USPS currently leases some of its owned excess space—including space at its retail facilities, such as parking, office space, and roof areas—to other entities, generating additional revenue and other benefits. According to USPS as of January 2020, USPS was leasing space in 232 facilities (about 3 percent) of its 8,362 owned facilities to federal and local government and private entities. USPS generated about $29 million from its leases in fiscal year 2018. USPS officials told us they are currently researching the feasibility and benefits of leasing space to entities to place automated teller machines in retail facility lobbies and parking lots as a way to generate revenue. Stakeholders we interviewed and USPS OIG have said leasing space may also result in non-revenue benefits for USPS and consumers. For example, a postmaster who managed a retail facility said that leasing office space to two local government entities likely increased foot traffic in the facility and increased community access to government services provided by the tenants.

USPS, however, has little additional vacant rentable space. As of September 2018, USPS reported that it had vacant rentable space available in 307 (about 4 percent) of its 8,362 owned facilities. In 2018, USPS OIG reported that USPS faced unique challenges in leasing such excess space, including poor condition and limited size, lack of handicap accessibility, limited parking, lack of accessibility without interfering with USPS operations, and lack of a separate restroom. According to GSA officials, some available space is small—USPS reported that about 9 percent of available space is less than 500 square feet—and may require significant investment from GSA or the potential tenant agency to be suitable for occupancy (see fig. 7). GSA officials said it has been difficult to find federal government entities willing to lease retail facility space from USPS. For example, officials from the Census Bureau told us that they leased some space at two USPS facilities to support 2010 Census activities, such as to support hiring personnel and a location for training. However, they were not able to lease as much as they would have liked because there was very little available space that met Census requirements, and the space that was available would have required costly modifications prior to use. In addition, USPS officials told us there can be costs related to leasing space, such as USPS’s making needed renovations.

USPS does not track the extent to which space at retail facilities, such as lobbies and parking lots, is shared with other entities without any payment. However, USPS officials told us that while community groups have asked to use retail facility space and parking lots, these requests do not happen frequently. Only two of the 149 postmasters we surveyed (about 1 percent) indicated that the selected retail facility they oversaw shared space with other entities at no charge.

Additional Nonpostal Efforts at Retail Facilities Could Offer Some Benefits but May Generate Little Revenue and Have Other Limitations Additional Nonpostal Products and Services Could Provide Non- Revenue Benefits

Studies we reviewed and postal experts and stakeholders we interviewed have suggested that USPS may be well positioned to offer additional nonpostal products and services due to its trusted brand, vast retail facility network, and experience with other nonpostal efforts. Examples of such additional offerings are set out in the following table (see table 3).

USPS officials, stakeholders, and studies we reviewed indicated these identified additional nonpostal activities—if USPS were authorized to offer them—could offer a variety of non-revenue benefits to consumers, government entities, and communities. Examples of some of the suggested types of non-revenue benefits are shown in table 4.

However, most of these additional nonpostal products and services would not increase revenues or greatly benefit their communities, according to the postmasters we surveyed. Specifically, a majority of postmasters did not think any of the nine additional nonpostal products and services we asked about would increase revenues or benefit the community to a great or very great extent. However, postmasters indicated that some potential services were more promising than others. In particular, about 40 percent (59 of 149) of postmasters indicated that notary services would increase revenues or benefit the community to a great or very great extent, while 36 percent (53 of 149) of postmasters indicated that driver’s license and other state license services would increase revenues or benefit the community to a great or very great extent. Few postmasters in our survey indicated that a benefit of offering any of the nine additional nonpostal products and services would be that they would be providing a product or service that is not offered elsewhere in the community.

Most Additional Nonpostal Products and Services Would Likely Have Low Net Revenue Potential

USPS officials, officials from other federal government entities, and stakeholders told us that most of the nonpostal products and services identified above would likely have limited revenue potential. They, as well as studies we reviewed, indicated a variety of reasons why USPS might not generate significant net revenue from the additional nonpostal products and services we identified.

Low potential for a significant market share. USPS officials and stakeholders told us USPS could face challenges gaining enough of a market share for some of the additional nonpostal products and services to make a profit. For example, USPS officials said if they offered notary services, they would likely gain only a small share of the market because other retailers, such as banks, already offer these services for free. Also, representatives from four financial associations said they believed consumer demand for financial products and services was already being met or would best be met by existing financial entities, and that many consumers may not likely obtain these services from USPS. In addition, representatives from two financial associations said serving underbanked populations would likely result in limited profits because these tend to be riskier customers who may default more often, and the services they use result in slim profits for current providers.

High operational costs. USPS OIG has reported that USPS incurs low customer foot traffic and high labor costs compared to other retail facilities. According to USPS officials, these factors make it difficult to compete on a cost-per-transaction basis for nonpostal products and services and make leasing space in owned facilities and subleasing space at USPS’s leased retail facilities attractive, because leasing and subleasing would not incur personnel costs.

Additionally, USPS officials told us that offering some of the additional nonpostal products and services could require significant investment costs—such as major technology investments and additional training for mail clerks—further reducing USPS’s ability to make a profit. For example, USPS OIG estimated in 2015 that USPS could generate $1.1 billion annually after a 5-year ramp up from expanding the financial products it already offered. USPS officials, however, said that expanding such offerings at retail facilities would likely require extensive investments in physical and information technology security and incur ongoing costs. Accounting for these sorts of costs would mean USPS would likely generate about $100 million to $200 million in net revenue as opposed to $1.1 billion. In addition, representatives from the American Association of Motor Vehicle Administrators and the Maryland Motor Vehicle Association told us that if USPS were to offer state driver’s license services, it would need to invest in equipment and training. Specifically, USPS would need to purchase secure computer systems that require multiple electronic interfaces and train mail clerks to handle complex document verification for issuing state driver’s licenses in order to meet requirements set by the REAL ID Act of 2005, among other concerns.

Limitations on amounts charged. USPS officials and other stakeholders indicated that the fees charged for some of the additional nonpostal products and services would be too low to result in high revenues. For example, USPS officials found there would be little potential revenue from providing photocopying services or placing vending machines in retail facilities. Also, NPS officials and representatives from AFWA told us that current providers of National Parks and Federal Recreational Lands Passes and state hunting and fishing licenses generally do not generate much revenue due to the fee structure. In addition, USPS may or may not charge other entities a fee for sharing information at retail facilities. For example, USPS’s partnerships to share information on other government entities’ behalf, such as providing selective service registration forms and displaying information for DOJ’s National Crime Victims’ Rights week, do not generate revenue. Last, any effort to expand community services would not be intended to generate revenue.

We have previously reported that foreign posts began offering nonpostal products and services to increase revenues, such as offering banking or financial services and making additional government services available in their retail facilities, but these efforts have had mixed results. Some foreign postal operators have expanded their financial offerings at retail facilities and have generated significant revenue from these efforts. For example:

The United Kingdom’s postal retail operator—The Post Office—has an agreement with virtually all the retail banks in the United Kingdom that enables customers to use retail facilities to access their banking services. According to The Post Office, the financial services it offers generated €205 million in 2017 and €215 million in 2018. (Cost data were not available.) Officials from The Post Office told us this agreement has not only generated income, but also increased foot traffic to their retail locations.

France’s postal operator, La Poste, established a bank in 2005 to provide a full range of banking products and services through its retail facilities. According to La Poste, its banking services generated net revenues of €5.5 billion in 2018, which was down from €5.6 billion in net revenue in 2017.

However, USPS officials and representatives from banking associations cautioned that the financial and regulatory infrastructures of other countries are too different from those of the United States to suggest that USPS could achieve similar results. In addition, foreign postal operators are starting to sell their banks or have a franchise model with relatively lower-paid staff.

Views Varied on Demand and Feasibility; Other Limitations Affect Viability of Nonpostal Services and Products

There were mixed views on whether there would be demand for any or all of these nonpostal products and services. On the one hand, USPS officials, officials from other federal government entities, postmasters we surveyed, and stakeholders generally said that there was little demand for many of the additional nonpostal products and services USPS could offer at its facilities. In particular, postmasters did not indicate very high demand for any of the nine additional nonpostal products or services we asked about in our survey. The highest response for products and services in demand was only about 36 percent (53 of 149) of postmasters who said there was demand for notary services, and the next highest was about 33 percent (49 of 149) of postmasters who said there was demand for printing and photocopying services. Also, officials from the 12 federal government entities noted that while they were open to new partnerships in which mail clerks perform transactions on their behalf or in which the entities would have access to retail facility space, officials did not identify many specific examples of a need for such services. None of the postmasters we surveyed reported that they had been approached by community members in the last 10 years to share or lease space at their retail facility.

On the other hand, based on studies we reviewed and interviews with representatives from consumer groups, there may be demand for certain offerings at retail facilities, such as check cashing and payday loan services, particularly if offered at a lower price than competitors. For example, in 2014, the Pew Charitable Trusts conducted a nationally representative survey of 1,626 adults and estimated that only around a quarter of American adults would be very likely or likely to use certain financial products, including check cashing, prepaid cards, bill pay, and small-dollar loans, if offered at USPS retail facilities. However, for those surveyed who were already using such services, respondents indicated they would likely obtain these at USPS retail facilities if offered at a lower price.

Regarding feasibility, stakeholders and postmasters identified various issues related to what types of nonpostal products and services made sense to them. Postmasters indicated that displaying information about government programs and printing and photocopying services were the most feasible potential service, about 64 percent (95 of 149) and about 63 percent (96 of 149), respectively. In contrast, postmasters thought grocery pick-up and public wifi services were the least feasible, with about 78 percent (116 of 149) and 64 percent (96 of 149) of postmasters, respectively, indicating that they were not feasible. A representative from one of the employee unions told us that the success of additional nonpostal efforts would depend on the retail locations’ having adequate staffing levels. The representative also said that any nonpostal efforts should be designed to align with community needs and the work that retail facility employees already conduct. Officials from the Federal Communications Commission and representatives from a telecommunications association told us telecommunications companies may consider leasing space at USPS’s retail facilities that are suitable for wireless antennas to help build out 5G networks, subject to network design and business needs. In addition, representatives from one state motor vehicle administrator told us state motor vehicle administrations may consider partnering with USPS to provide state vehicle tag and title services on their behalf, such services, would not require substantial investment for USPS to undertake.

Finally, USPS officials, federal government entities, and postmasters we surveyed, and stakeholders identified a variety of other limitations that would affect the viability of nonpostal products and services. We found that these limitations included limited interest for partnerships from other federal government entities, the size and unfavorable characteristics of retail facility space, complexities related to existing regulatory structures and entering into new markets, and personnel concerns. Examples of these limitations are described in table 5. Moreover, we also asked postmasters what challenges would prevent their selected retail facility from offering these additional nonpostal products and services. The most commonly cited challenges were insufficient staff or the need for additional staff training, particularly for notary services, driver’s license or other state license services, financial services, and banking services.

As discussed above, given that these potential nonpostal products and services may have benefits but face concerns about their viability, USPS and policy makers need to consider the benefits, costs, and limitations of potential nonpostal efforts before introducing new efforts. In particular, though some efforts could create benefits like enhanced access for consumers, a variety of challenges may limit revenue generation in such a way that the potential offerings are unlikely to significantly improve USPS’s financial condition. Moreover, there are a number of limitations to be considered, including a potential lack of demand and factors affecting USPS’s ability to implement such offerings.

Agency Comments

We provided a draft of this report to the Census Bureau; Federal Communications Commission; GSA; U.S. Department of Veterans Affairs; U.S. Department of Homeland Security’s Federal Emergency Management Agency and Transportation Security Administration; U.S. Department of the Interior’s Fish and Wildlife Service and National Park Service; U.S. Internal Revenue Service; U.S. Department of Justice’s FBI and Office for Victims of Crime; U.S. Department of State; and USPS. The Census Bureau and GSA sent us technical comments, which we incorporated as appropriate.

In its response, USPS reiterated its legal constraints but noted that there were other limitations affecting its ability to expand its offering of nonpostal products and services. These limitations include low net revenue potential, low potential for significant market share, high operational costs, and limits on amounts that could be charged. USPS noted, however, that it continues to explore partnerships with other federal agencies.

We are sending copies of this report to the appropriate congressional committees, the Postmaster General, the Chairman of PRC, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact me at (202) 512-2834 or rectanusl@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 major contributions to this report are listed in appendix IV.

Appendix I: Objectives, Scope, and Methodology

the costs, revenues, and non-revenue benefits associated with U.S. Postal Service’s (USPS) retail facilities; the nonpostal efforts USPS has conducted since 2008 to increase revenues and non-revenue benefits from its retail facilities, and the costs, revenues, non-revenue benefits, and challenges of such efforts; and the key considerations of additional nonpostal efforts that USPS could take to increase revenues and non-revenue benefits from its retail facilities.

For this report, we focused on USPS-managed retail facilities, including USPS-operated post offices, postal stations, branches, and carrier annexes, as defined in USPS’s Annual Reports to Congress. We also used the term “nonpostal” to refer to activities that are not directly related to mail delivery. We selected 2008 to begin our analysis because that was when new restrictions on nonpostal services took effect.

To describe the costs, revenues, and non-revenue benefits of USPS’s retail facilities, we reviewed USPS’s financial analyses of its retail network from fiscal years 2017 and 2018, the only years USPS conducted such analyses at the time we published this report. For these analyses, USPS identified the sources and amounts of retail facility costs (e.g., personnel, rent, and utilities) and revenues (e.g., stamp sales and post office box rental fees) for most of USPS’s retail facilities. Because some retail facility costs USPS identified (e.g., rent and personnel) also support non- retail functions, USPS used models to distribute such costs across each retail facility. USPS’s analyses also calculated the net revenues (revenues minus costs) for those retail facilities included in its analysis. Further, USPS examined characteristics of retail facilities, such as the facilities’ surrounding population densities, to describe factors that may be related to retail facilities that did or did not achieve positive net revenues. Based on interviews with USPS officials and USPS documents we reviewed, we determined the reliability of these analyses were sufficient to describe costs and revenues of retail facilities. We compared retail facility costs and revenues with USPS’s total costs and revenues to determine how much retail facilities contribute to total costs and revenues. In addition, we identified the number of retail facilities located in urban, suburban, or rural areas where the revenues did and did not cover costs. We defined these geographic categories using USPS’s definitions in its retail facility cost and revenue analysis.

We also interviewed USPS officials to describe why revenue at retail facilities may not cover costs. To describe non-revenue benefits of USPS’s retail facility network, we reviewed relevant publications and studies, such as those conducted by USPS, USPS’s Office of Inspector General (OIG), and USPS’s oversight body, the Postal Regulatory Commission (PRC). We also examined 2018 data from USPS on the number of customer visits at the retail facilities for which data were available. Additionally, we interviewed representatives from two consumer groups, which we selected based on their ability to provide us with consumer viewpoints on retail facilities and their offerings, and two organizations representing USPS workers at retail facilities: American Postal Workers Union (APWU) and United Postmasters and Managers of America (UPMA).

To examine the nonpostal efforts USPS has conducted to increase revenues and non-revenue benefits from its facilities since 2008 and their results, we first identified nonpostal products and services offered at USPS’s retail facilities through interviews with USPS officials and reviews of relevant publications, such as PRC’s report on USPS’s product offerings and USPS OIG reports. See table 6 for a complete list of USPS OIG reports we reviewed. We also identified the number of retail facilities that offered each identified nonpostal product and service, where data was available, using USPS’s facility data from November 2019, as well as information from USPS’s Inspection Service on facilities that participated in the Department of Justice’s Office of Victim’s National Crime Victims’ Rights week. Because USPS’s facility data included facilities without retail functions, we merged these with data from USPS’s fiscal year 2018 financial analysis of its retail network to ensure we included only facilities with retail functions. To describe the revenues of the nonpostal products and services we identified, we reviewed data from USPS’s fiscal year 2018 financial analysis of its retail network. We also reviewed USPS OIG reports to identify indirect ways that nonpostal products and services can contribute to revenue at retail facilities.

To identify the costs of these activities, for which information was available, we reviewed USPS’s fiscal year 2018 Annual Compliance Report, PRC’s fiscal year 2018 Annual Compliance Determination Report, and non-public data provided to us by USPS. From these reports, we also determined whether the revenue USPS generated from these nonpostal efforts did or did not exceed costs. We reviewed only fiscal year 2018’s revenue and costs because we did not have revenue data prior to fiscal year 2017 and USPS was unable to provide information on trends.

As one of the nonpostal efforts USPS can currently take at its retail facilities includes leasing space for revenue, we reviewed USPS’s data on the amount of vacant rentable space for fiscal years 2017 and 2018 (the only available years), on tenants at its facilities as of January 2020, and on the amount of revenue USPS collected from its leased space from 2018. Based on interviews with USPS officials and USPS documents we reviewed, we determined the reliability of these data were sufficient to describe USPS’s efforts and results of leasing excess space at retail facilities. To obtain stakeholder views on USPS’s nonpostal efforts, including the costs, revenues, non-revenue benefits, and challenges of these efforts, we interviewed officials from six federal government entities that partnered with USPS on initiatives as well as representatives from APWU, UPMA, and two consumer groups. See table 7 for a complete listing of the entities we interviewed. We also interviewed officials from the U.S. General Services Administration (GSA), which leases space on behalf of USPS to other federal government entities, and the Association of United States Postal Lessors, which represents entities that lease space to USPS. We also interviewed postal stakeholders at three retail facilities that had vacant leasable space, leased space to other entities, or offered nonpostal products and services. We selected these locations to obtain information on a variety of USPS’s current nonpostal efforts.

To examine the benefits and key considerations of offering additional nonpostal efforts at USPS retail facilities, we interviewed USPS officials, postal stakeholders, and postal experts, selected based on prior work; reviewed prior GAO reports and relevant USPS OIG studies; and attended a forum exploring community use of USPS’s delivery infrastructure, including retail facilities. From the studies we reviewed and stakeholder suggestions, we selected and categorized examples of nonpostal efforts that were mentioned at least twice. To obtain stakeholder views on the potential benefits and limitations of such offerings, we interviewed representatives from consumer, industry, and state licensing groups. We selected these entities because of their potential to be affected by USPS offering additional nonpostal products and services. We also interviewed officials from the six federal entities that have partnered with USPS on initiatives and an additional six federal government entities that could potentially establish expanded or new partnerships with USPS. See table 7 above for a complete listing of the entities we interviewed. We also interviewed two foreign postal operators—France’s La Poste and the United Kingdom’s Post Office— that have experience with nonpostal products and services similar to those we reviewed and reviewed relevant documentation, such as their annual fiscal year 2018 financial reports. We selected these postal operators based on prior work and other studies and to provide us with insight into their experiences. Finally, we reviewed statutes, including the Postal Accountability and Enhancement Act (PAEA); regulations; and legal rulings, to evaluate USPS’s current legal authority to provide these services. The views presented in our report are not generalizable to those of all stakeholders.

Further, we surveyed USPS postmasters to obtain additional perspectives on the benefits of USPS’s retail facilities, the nonpostal efforts offered at those facilities, and the key considerations of offering additional nonpostal products and services. Specifically, we conducted a non-generalizable, web-based survey of postmasters who managed retail facilities located in urban, suburban, and rural areas from August to September 2019. We defined these geographic categories using USPS’s definitions, as described above. Using the dataset of facilities from the USPS revenue study, we removed all facilities that were located in an overseas American territory, any facility missing a geographic category code, and certain kinds of facilities that were not relevant to the survey. Using these filters we identified a sample frame of 26,600 retail facilities. We randomly sorted the facilities within each of the three geographic categories and took the first 150 from each random sort. We then matched the selected USPS facilities with the postmaster responsible for them, using USPS’s postmaster data provided to us in May of 2019. Because postmasters may manage more than one retail facility, we capped the number of surveys an individual postmaster could receive at one. If a postmaster already selected in the random sort occurred again the selected facility was omitted from the sample. We restricted the total sample size to no more than 100 unique postmasters within each stratum. The sample is comprised of 83 postmasters who oversee an urban retail facility, 100 postmasters who oversee a suburban retail facility, and 100 postmasters who oversee a rural retail facility. Approximately 52 percent of our sample—or 146 postmasters—completed the survey. The survey questionnaire can be viewed in appendix II.

In developing, administering, and analyzing the survey, we took steps to minimize non-sampling error that may result from differences in how a question is interpreted and the sources of information available to respondents. To help reduce measurement error, we consulted an experienced former postmaster for input on the development of the survey instrument, and also conducted pretests of the draft questionnaire with four postmasters drawn from the intended survey population. The questionnaire was modified throughout development and pretesting to improve clarity of the questions, and we removed questions when our modifications were unable to remedy observed difficulties in interpretation. To maximize survey response, we sent pre-notification letters by postal mail to the selected respondents prior to launching the web survey. After launching the survey, we sent multiple email reminders and extended the submission deadline, and also conducted follow-up phone calls.

Appendix II: GAO’s Survey of U.S. Postal Service (USPS) Postmasters at Selected Retail Facilities

GAO administered the survey questions shown in this appendix to learn more about USPS postmaster views related to the community benefits of USPS’s retail facilities, the nonpostal efforts offered at those facilities, and the key considerations of offering additional nonpostal products and services. The survey was divided into seven sections covering background, post office benefits to the community, current USPS nonpostal products and services, leasing space for revenue, sharing space, additional nonpostal products and services, and additional information. Open-ended follow-up questions were selectively included to allow respondents to provide more detail about their responses. This appendix accurately shows the content of the web- based survey, but the format of the questions and response options have been changed for readability in this report. For more information about our methodology for designing and administering the survey, see appendix I.

Appendix IV: GAO Contacts and Staff Acknowledgments

GAO Contact

Lori Rectanus, (202) 512-2834 or rectanusl@gao.gov.

Staff Acknowledgments

In addition to the contact name above, Kyle Browning (Assistant Director); Anne Doré (Analyst in Charge); Isabelle Aboaf; Carl Barden; Karen Chen; Barbara El Osta; Geoff Hamilton; Serena Lo; Tina Paek; Samuel Portnow; Malika Rice; Matthew Valenta; and Lauren Voloder made key contributions to this report.