Wednesday, December 17, 2008

The Grinch Stole Christmas!

It looks like the Grinch truly stole Christmas this year. If you were here on planet earth, you saw empty stores begging for your business and consumers staying away in droves. Maybe you saw chicken instead of turkey on the table and fewer packages under the tree.

The economic “slow down” has become a “melt down.” A new Washington Post survey shows that 63% of the public has been hurt by the economy and that 15% of us are behind on our mortgages. The holiday season foreclosure moratorium ends on January 1, and experts anticipate a big upsurge in bad news then.

Direct marketing also saw a steep decline. Year over year, millions of fewer catalogs hit the mail as beleaguered stores hunkered down; banks sent a billion fewer credit card solicitations as credit dried up, and the housing industry sent 66% fewer mailers. Citibank and Charles Schwab cut their mailings 98% and 95% respectively. Mortgage mailings dropped 44%.

The 2008 political fundraising juggernaut bled available discretionary funds from non-profits, reducing their ability to launch mailings. It was ugly. The result: a 4.5% decline in mail volume from last year and a huge loss of $2.8 billion for the USPS in FY 2008.

The USPS reacted predictably, tearing down manpower-costly curb-side collection boxes, reducing operating hours when and where possible, closing under-utilized facilities, eliminating employees through early-out retirements, asking exhausted postmasters to wear multiple hats during their now common 12-hour shifts, and using contract companies to transport mail between cities. The likely result: delayed mail deliveries as the annual Christmas bulge worked its way through the system.

That was the easy part.

Universal mail service is on the table, with 6-day-a-week service being the most obvious service to sacrifice.

The USPS has approved raising the prices of Express Mail, Priority Mail and parcel shipping services by an average of 5% in January 2009.

But wait! There’s more! In February, the USPS will announce price increases for all classes of mail which will be implemented in May. As if raising rates will help bring back lost mail volume (see Econ 101, Cause and Effect).

No, the holidays aren’t what they could be this year.

But if we each got a piece of coal in our Christmas stocking this year, it would behoove us to remember that a diamond is simply a lump of coal under extreme pressure.

Maybe it doesn’t get better than this for a while.

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