Almost every day over the past year, there’s been a ribbon-cutting ceremony to celebrate the opening of a new Village Post Office.  There are hundreds of stories in local newspapers about these grand openings.  The Postal Service clearly thinks that Village Post Offices play an important role in its vision of the future.  But it’s not exactly clear what function they really serve.

Just this past week, the Postal Service opened a Village Post Office in the Creekside Market and Grill in Miracle, Kentucky; the Summit Mart convenience store in Mount Summit, Indiana; Ferrante Upholstering in New Beaver, Pennsylvania; and Knoll Brothers Retail (also a convenience store) in Kingsford Heights, Indiana.

At this point, there are over 760 VPOs in operation.  Nearly all of them just sell stamps and give out flat-rate boxes.  Despite the name, they're not really “post offices."  The Postal Service chose to call them that because they were originally intended to replace real post offices.  The Postal Service wanted small town communities to feel that while they might be losing their post office, they would be getting a good-old-fashioned “Village Post Office” instead.  There would still be a warm place in town to meet and greet the neighbors.

Now the Postal Service says that VPOs are not intended to replace post offices.  Rather, they provide some added convenience to customers who can’t get to the post office when it’s open — a common problem now that POStPlan has reduced hours at nearly 13,000 post offices.

But one can’t help but wonder if the Postal Service doesn’t have some other motive besides “customer convenience.”  After all, if customer convenience were really a priority, why reduce post office hours for 13,000 communities?  And what about customer convenience in the more than 12,000 communities that aren’t getting a VPO to supplement the reduced hours at the post office? 

The VPO program is actually about something other than customer convenience.  It’s part of the Postal Service's effort to redirect retail traffic from brick-and-mortar post offices to "alternate channels."  These include USPS.com, stamps-on-consignment (at over 50,000 pharmacies, banks, and retailers), and pack-and-ship stores in the Approved Shippers program — like the 1,500 Staples stores where the Postal Service will soon be found and the 2,000 Walmarts that will soon have a Goin Postal shipping store that sells USPS products. 

By bringing in more business through alternate channels and less business at post offices, the Postal Service can cut window hours and save some money.  That translates into fewer union-wage jobs for postal clerks.  Plus, with customers getting more accustomed to doing postal business at private retailers, it will also be easier for the Postal Service to close post offices when the time is right.  Ultimately, directing customers to Staples, Walmart, or a VPO represents another a step in the privatization of the retail network.     

That this is the Postal Service’s goal becomes clearer when you look at the economics of VPOs, where they’re being located, and how the rationale for them has evolved.

 

The rationale: From replacement to supplement

When the Postal Service first introduced the concept of the Village Post Office back in July 2011, it was described as a “replacement strategy.”   The idea was to close 3,700 post offices and “partner” with mom-and-pop shops in small towns — convenience stores, general stores, gas stations, hardware stores, deli shops, and the like — to put a mini-post office in the retail business.  Other countries had done similar things, and postal management probably believed it could work here too.

But the great new concept of the VPO quickly ran into problems.  It turned out that many of the towns where the Postal Service wanted to close the post office didn’t have a suitable location for a new VPO.  Another issue was that many business owners who might have opened a VPO didn’t want to be blamed for the post office closing.  As one postal official put it, there was a “stigma” attached to opening a VPO. 

Another part of the problem was that the Postal Regulatory Commission, which was doing an advisory opinion on the initiative to close post offices, expressed serious reservations about VPOs because they only sell stamps and hand out flat-rate boxes.  The PRC suggested that VPOs might be useful as a supplement to a post office, but not a replacement. 

The closure initiative ran into a lot of opposition, and the Postal Service decided that instead of closing 3,700 post offices, it would reduce the hours at 13,000 and get rid of their career postmasters.  The Postal Service said that it would go ahead with the VPO program, only now VPOs would be used as the PRC had suggested — as a “supplement” in communities where the post office was having its hours cut, but not as a “replacement.”

 

The locations: From POStPlan to anywhere

There are now over 760 VPOs across the country. The Postal Service keeps a list of them on its website, which you can see here.  We’ve put it on Google docs, here, with a table and map here.  The Postal Service has its own map here.  (Note that there are a few inconsistencies between the Postal Service’s VPO list and the VPOs that appear on the USPS Locator page.)

As one can see from the VPO list, during the first year that the VPO was introduced, from August 2011 to August 2012, only about 40 VPOs were created.  That’s because of the problems noted above — no place to put them, the stigma issue, and the PRC’s criticisms.

Then in fall 2012, POStPlan implementation began, and the Postal Service started using VPOs to supplement the post office having its hours reduced.  During the second year of the VPO, August 2012 to August 2013, about 281 were created.  Of these, 217 (or 77 percent) were in zip codes that were part of POStPlan.

In the following year, however, something happened.  About 400 new VPOs were created, but only 170 of them (42 percent) were in zip codes where the post office was having its hours reduced under POStPlan.  In September 2014 (the last month on the list), another 36 VPOs were created — only half of them in zip code areas that are part of POStPlan.

The Postal Service is thus putting a lot of VPOs — more and more, it seems — in zip code areas where there’s already a fully functioning post office operating at regular hours.  At this point, of the 760 VPOs, there are about 340 VPOs (45 percent) in zip code areas where there’s no POStPlan post office. 

Many VPOs have been located in dense urban areas where there are several post offices nearby.  In the Dallas-Fort Worth area, for example, there are 200 or 300 regular post offices in operation (depending on where you draw the boundaries).  The Postal Service has set up 18 VPOs in this area.  There are a half dozen VPOs in San Diego and another half dozen in the suburbs south of Los Angeles, areas rich in regular post offices.  There are three VPOs in Santa Ana, with 20 post offices nearby.

What is the rationale for putting so many VPOs in places where the post office is open regular hours?  How are these VPOs “supplementing” the operations of the regular post office? Why were these particular locations chosen, anyway?

 

The finances: From costs to revenues

The Postal Service claims that VPOs not only provide added customer convenience; they are also profitable.  That’s another dubious claim.

In May 2014, postal watchdog Stephen J. Bahnsen wrote an excellent piece about VPOs for Linns.com Stamp News that examined this very question.  Based on data he obtained through frequent requests under the Freedom of Information Act, Bahnsen showed that the VPOs are costing the Postal Service a lot of money.

The average VPO is paid about $1,000 a year for selling stamps and handing out flat-rate boxes.  There’s a lot of variation in how much each one gets paid, though.   At the high end, the VPO in the Gerstner Hardware store in Glenn, Mich., is paid about $9,200 a year for its VPO.  At the low end, some retailers are paid as little as $1 a year to host a VPO. 

In addition to the annual payments, the Postal Service has to cover the cost of signage.  Signs range from about $700 to $2,000, depending on the size and whether or not they’re illuminated.

In response to the Stamp News piece, the Postal Service issued a press release to “set the record straight.”  It explained that the pay differences had to do with the location and whether or not the VPO offered PO box services (some do, most do not).  The Glenn VPO, explained the Postal Service, has several hundred PO boxes so it is paid an unusually large amount. 

As for profit, the Postal Service does not provide revenue figures on its VPOs (or for any of its postal facilities, for that matter), and it rejected Mr. Bahnsen’s FOIA request asking for revenue data.  But in order to show that they’re profitable, the USPS press release did reveal a few numbers.

The Postal Service paid 63 VPOs in Indiana a total of about $80,000 as of April 30, 2014, and these VPOs sold more than $262,000 in stamps.  That sounds like a hefty profit of $180,000.  “Clearly,” says the Postal Service press release, “the VPO program is working.  Village Post Offices are making revenue for the Postal Service and serving our customers at more than 600 locations.”

But when it provided these numbers, the Postal Service did not include the cost of the signs or the cost of administering VPOs at both the local and national level.  (The program is supervised by National VPO Manager Max Raizada out of Denver.)  Perhaps more important, the Postal Service implies that this $180,000 “profit” would not have happened if the VPOs didn’t exist. 

This assumes, however, that the revenues from VPOs represent money that would not have come into the Postal Service through other means.  That’s simply not the case.  Most of the customers who buy stamps at a VPO would have gone to the post office to buy them.  The VPO isn’t bringing in any extra money, but it’s definitely costing extra to operate them.

VPOs aren’t particularly profitable for the host businesses, either.  About 30 or 40 VPOs have already closed over the past couple of years (as one can see by comparing earlier lists of VPOs with the current list).  The Postal Service doesn’t make much of it when a VPO closes, and there’s no requirement to consult with the community (as there is for regular post office closures), so it’s hard gathering information about why a VPO closes.  Sometimes the host business has just gone out of business, but sometimes the retailer decides that the VPO is simply not worth the trouble. 

 

The hosts: From convenience stores to libraries

For some reason, the Postal Service seems reluctant to share information about the name of the host business where a VPO is located.  The list of VPOs on the Postal Service website just gives the address, not the business name.  The same is true if one searches for a postal provider on the USPS Locator page — again, you get the name of the VPO but not the name of the business itself.  

If you do a Google search for an address, you can usually find the name of the business.  If you follow the VPO news, it’s no surprise that a large percentage of VPOs are located in convenience stores.

These stores often sell beer and sometimes liquor, and one VPO (in Vicco, Kentucky) is actually located inside of a liquor store.  That’s apparently not an issue, even though the Postal Service has strict rules about such matters.

For example, contract postal units (CPUs) “must not be located in or directly connected to a room where intoxicating beverages are sold for consumption on premises (USPS Publication 156, Guide to Contract Postal Units,Section 1-6.6.1).

Along similar lines, the Postal Service Standards of Conduct, ELM 665.26, states that “employees must not have or bring any container of beer, wine, or other intoxicating beverage into any Postal Service facility or premises, whether or not the container has been opened.  Employees found to be violating this policy may be subject to disciplinary action.”  

While nearly all VPOs are in private retail businesses like convenience stores, a few of them have opened in public libraries.  (No intoxicating beverage issues there.)

Library VPOs include Moline, MI; Marshall, WI; Ephrata, PA; two in Kansas City, MO (Lucile H. Bluford and North-East Branch); Oakdale, CT.; Leaf River, IL.; and Burt, IA.  Library Journal even ran an article, “Libraries Could Double as Post Offices.” 

Some of these libraries are receiving a substantial amount for hosting a VPO.  In another article, this one in the Wisconsin’s Badger Postal History, Mr. Bahnsen wrote reported that the VPO in the Manitowish Waters, Wisc., library gets $3,866 a year, and Marshall’s library gets $2,940. 

It’s nice to see the Postal Service helping out the local library in this way, but that seems like a lot of money for selling stamps and handing out flat rate boxes. Plus, the library is siphoning off revenues that would have otherwise come in at the post office.  If it’s a POStPlan office, this makes it more likely that the post office hours will be reduced even further next time work hours are reviewed.

 

The agenda: From brick-and-mortar to alternate access

In the big scheme of things, the Village Post Office program can’t be having much impact.  A few hundred VPOs, even a thousand or two, will not have a measurable effect on the Postal Service’s bottom line. 

A thousand VPOs might cost $1 million in annual fees to the owners, plus signs and administrative costs.  They might bring in $3 or $4 million in revenue — nearly all of it income that would have come in through the post office.

To put that in context, in 2013, the Postal Service brought in $10.7 billion via post offices and $7.5 billion through all the other alternate access channels combined.  If VPOs were responsible for $4 million in revenue, they would represent 0.05 percent of alternate access revenue and 0.02 percent of total retail revenue.  (There's more on the numbers here.)

VPOs are also not doing much to help supplement POStPlan post offices either.  With 13,000 post offices having their hours reduced, how much good does it to do put a VPO in 400 or 500 of these communities?  And remember, they only sell stamps and give out flat-rate boxes, so customers usually still need to get to the post office.

Given how low impact VPOs are, one wonders why the Postal Service even bothers with them.  Probably the most that can be said for them is that they do have some symbolic value.  Postal officials can point to the VPO program when they want to show how alternate access channels are responsible for a growing percentage of retail revenues, which helps the Postal Service save money running post offices.

The Postal Service is clearly shifting away from brick-and-mortar post offices and moving toward privatization of its retail network, but VPOs aren’t playing a significant role in this process.  They're mostly just PR.

The real action is taking place at places like Staples and Walmarts.  When customers can do their postal business at big box stores, seven days a week, early in the morning and late in the evening, there’s a lot less reason to stand in line at the post office.  The percentage of revenues that comes in at post offices will continue to decrease, and the Postal Service will cite this fact as justification for further cutbacks.  Window hours will be cut further, post offices will relocate to smaller and less convenient locations, and the transition to a privatized retail network will continue.

(For more on the Village Post Office, see these previous posts.)

(Photo credits: Grand openings of VPOs in Simsons Corner Store in Charlotte Hall, MD; Rocky's Convenience Store & Campground in Shady Grove, FL; Country Store in Nanjemoy, MD; Country Store in Mansfied, GA; Pike's Corner Oasis in Livormore Falls, ME; Sam's Corner Store in Crescent Valley, NV; Kwik-Six Package Liquor Store in Vicco, KY; public library in Kansas City, MO; Big S Market in Topmost, KY; City Hall in Downing, MO)