Thursday, December 30, 2010

Ending Denominated Stamps

USA Today reported on December 28, 2010 that all First Class stamps in 2011 will be forever stamps.  Currently, forever stamps are only available in a limited number of generic designs. The switch puts commemorative stamps on a equal competitive plain as more generic stamps sold in booklets and sheets.

The shift reflects a final blow to the traditionalists and penny counters at the Postal Service that held onto denominated stamp concept far beyond the point that it made business sense for either First Class mail or for the Postal Service's commemorative program.  For those with some memory of the regulatory process, the forever stamp was pushed for many years by the Postal Regulatory Commission's Consumer advocate and approved in 2007 after long opposition from the Postal Service.  

The elimination of denominated First Class stamps should provide a limited boost to the Postal Service in three ways.

  • Eliminating the purchase of 1 and 2 cent stamps when there is a rate change saves the Postal Service money.   If one assumes that it would take 1 minute of a postal clerk's time to sell stamps, it would cost the Postal Service on average 13 cents if the clerk was paid the federal minimum wage and received no benefits.   So in order for a purchase of low denomination stamps to be profitable, a minimum of 14 cents worth of stamps would have to be sold at a time.   Given that postal clerks are paid well above the minimum wage and have benefits, the break-even point for selling stamps (assuming the cost of the service was already paid for in the existing postage purchased) would be at least 40 cents.  So unless a person needs to purchase forty 1 cent stamps, the Postal Service would be losing money on each purchase at a retail counter.
  • Eliminating the purchase of 1 and 2 cent stamps improves customer satisfaction and the quality of retail services.  By eliminating the need to buy these stamps, the Postal Service makes First Class mail easier to buy.   Consumers can buy stamps once and not have to worry about when the stamps will be used.  Also eliminating the need to buy low value stamps, improves the Postal Service's ability to quickly serve retail customers needing to buy all other services including higher priced parcel services.
  • Eliminating denominations on commemorative stamps should increase their acceptance.   Consumers now can buy commemorative or generic stamps with an equal assurance that the stamps will be good for First Class mail for as long as they will need them.   This should have the effect of increasing sales of commemorative stamps and ensuring that the entire print run of commemorative sell-out.
Forever stamps represent one element in the Postal Service's program to simplify the purchase of its services.   Flat rate boxes, pre-stamped greeting cards, and pre-paid postage shipping cartons are other illustrations of this trend.    These steps all reflect an expansion of the convenience factor which is critical when vying for the business of time-strapped consumers


Anonymous said...

What are we to do if you need those 1 & 2 cent stamps for postage on a package?

Anonymous said...

There's also another important reason they switched to Forever stamps. The Postal Service spends millions on stamp destruction. Each office has to spend considerable time counting, preparing and sending obsolete stock back to Accountable paper in each district. Accountable paper then has to count and verify all the stock and destroy it. It all amounts to a huge expenditure of hours and resources. But now that stamps are Forever, they can eliminate stamp destruction.

Anonymous said...

so how will we pay for the less than first class price of over one ounce letters? Right now the cost is 17 cents? Does that mean that we will have to put two 44 cent stamps on and swallow the difference?