The evolution of the parcel delivery market and the growth of ecommerce have been intertwined for years. During that time, the USPS’s role as a primary carrier choice for businesses has always been present and even strengthened in many ways. But as everyone in the logistics industry knows, the parcel delivery marketplace is evolving fast.
Notably, part of future evolution may be the privatization of the USPS. This controversial (but not new) idea is getting renewed attention and would have big implications for companies (and citizens). President Trump has recently expressed interest in privatizing the U.S. Postal Service (USPS), citing its long-standing financial struggles and declining mail volume. For example, per capita volume is below 37% of 2000 levels.
Founded in 1775, the USPS is older than the U.S. itself. It became a financially self-sustaining agency in 1970 and is, according to one survey, cited as one of the country’s favorites. However, in the fiscal year ending September 30, the USPS lost $9.5B after modernizing facilities and equipment, which did little to offset declines in mail volume and a slower parcel shipping business than anticipated. The postal service’s annual financial report disclosed nearly $80bn in liabilities.
Despite the decline, USPS maintains over 31,000 retail locations, which is one argument for privatization or at least some extreme cost-cutting. Many post offices fail to generate enough revenue to cover their costs. In the past, Congress has resisted closures, even though 42% of post offices operate at a loss, many of which are within miles of another location.
What’s the Proper Long-Term Solution to USPS Woes?
The answer needs to acknowledge that the USPS’ future should not be just about costs; it’s about a dynamic marketplace and the agency’s role. The types of parcel delivery demand, for example, is changing fast with more competition eager to satisfy it. Many B2C parcel shippers are aware of what once were called postal-hybrid services (now known as UPS SurePost and FedEx Ground Economy).
These services, sold by USPS’s biggest competitors, relied on USPS for the final mile delivery. That has changed as FedEx and UPS perform the final mile delivery themselves these days. Add to the competitor mix Amazon and many regional carriers, and USPS is in a more difficult situation than even a few years ago.
Though USPS has expanded with new e-commerce-friendly package delivery solutions (e.g., USPS Ground Advantage), private competitors like FedEx, UPS, and Amazon dominate the space. While the USPS benefits from tax and regulatory advantages, it still has an uphill battle in the marketplace and from the current administration to continue how it operates today. A task force previously concluded that USPS must undergo fundamental change, arguing that privatization would enable greater cost efficiency, flexibility, and independence from congressional interference while allowing access to private capital for modernization.
Profitability aside, the USPS has a stated mission to uphold
The USPS does serve a vital role for U.S. citizens, and there are important reasons not to privatize it. Or if it is, many of the missions of the service need to be maintained. Here is a partial list:
- Universal Service Obligation (USO) Protections – USPS has a commitment to delivering mail to every address, including rural and underserved areas, at uniform rates. Private firms might neglect unprofitable routes or significantly increase costs for remote locations.
- Public Service Over Profit – Unlike private companies, often driven by shareholder profits, USPS is a public service that prioritizes reliability and accessibility. Privatization could lead to higher prices and reduced service quality, especially for individuals and small businesses relying on affordable mail.
- Rural America Would Suffer – The USPS ensures affordable mail delivery to rural communities, where private carriers often charge higher fees or could refuse service altogether. A privatized USPS might abandon these areas or impose steep delivery surcharges.
- Price Stability – Currently, USPS keeps prices relatively stable due to its regulatory structure. Privatization could lead to dynamic pricing, where costs fluctuate based on demand, location, or competition, making mail services less predictable.
- Loss of Government Oversight – USPS is accountable to the public through Congress as a government entity. A privatized postal service would be driven by private interests, with less transparency and fewer consumer protections.
- National Security & Election Integrity Concerns – USPS handles official government mail, including tax documents, passports, and absentee ballots. Privatization raises concerns about security, data privacy, and potential political or corporate interference.
- Past Failures of Privatization – Countries like Germany and the U.K. privatized their postal systems but saw service cutbacks, higher prices, and reduced accessibility in rural areas. The U.S., with its vast geography, could face even greater challenges.
At the same time, privatization can likely help to improve delivery services and options. For example, UPS and FedEx are better able to make large and bulky deliveries compared to the USPS as it operates right now. This is a specific growing need in the parcel delivery market.
While the USPS faces challenges, privatization is not the only solution. Thoughtful reforms could modernize the service while preserving its public mission. Whether privatization is the eventual path for the USPS or not, businesses shipping packages should be watching closely. The options available and costs to service customers will continue to evolve, and hopefully for the better.