What If the Check Isn't in the Mail?


By Sam Jaffe and Olga Kharif When Postmaster General Jack Potter told ABC's Good Morning America on Oct. 24, "There is no guarantee that the mail is safe," he reinforced fears that death can come through the mailbox. That possibility now poses a huge challenge for the U.S. Post Office, perhaps the biggest challenge facing the mail since the Pony Express had to traverse the Rockies. Until the government figures out the extent of the anthrax threat, many people will likely stop opening their mail. Some bills won't be paid, and checks won't be cashed. "It's like September 11 -- the world has changed," says Thomas Kelly, first vice-president of Bank One. "If the mail were to stop, it would have a big impact on us."

Already, the anthrax attacks have hit the postal system hard. Two postal workers have died from the disease, and several more appear to be infected. Postal service in the Washington, D.C., area has all but stopped, and anecdotal reports all along the Eastern seaboard point to a substantial slowdown in mail delivery as the USPS races to deal with the anthrax problem.

ECONOMIC IMPACT. The economic ripple effects of these events could be enormous. The postal system supports almost $900 billion worth of transactions every year, or about one-fifth of the overall economy. Alternative methods for most payments and deliveries are available, but the transition period would be hectic and very costly. And the costs of the disruptions that have already occurred could show up in the company financial statements of some industries -- financial services chief among them.

It's hard to find a company that wouldn't be affected by a slowdown in the mail. From small businesses that use the mail for ordering and product delivery to large corporations that depend on it to mail out checks and bring in sales, everyone has some stake in the postal system. "If the mail were to just stop one day, it would have a catastrophic effect on the economy," says Charles Guy, adjunct fellow at the Lexington Institute and a former economist with the USPS.

To be sure, the mail hasn't stopped yet, and no one is predicting a complete shutdown. Even the stoppage in the nation's capital is likely to be temporary. The Postal Service's press office, which has been swamped, failed to respond when asked for comment on this story from BusinessWeek Online, but the Postal Service's public line is that there are no stoppages and no delay.

PHARMACY RUN. That's obviously not true in Washington, D.C. For the most part, deliveries to many downtown addresses are frozen (including those to the Washington offices of BusinessWeek). The freeze appears to be due to the fact that all postal workers, including mail carriers, had to leave work for anthrax-exposure tests and to pick up antibiotics. In addition, several central processing facilities in the area have been shut down for cleaning after anthrax contamination was detected.

And the slowdown extends beyond Washington. Scattered reports from New York, Philadelphia, Long Island, and even as far away as Chicago suggest that mail service is being slowed by the anthrax scare. "A lot less mail is coming in," says one postal clerk in the Northeast, who wished to remain anonymous. "We're still delivering the mail, but there has been a noticeable slowdown." A manager at an Illinois distribution center, who also requested anonymity, says that the delay on deliveries is no worse than some of the weather-related slowdowns that she's seen in her almost 30 years working there.

Things could get worse if more cases of mail-delivered anthrax surface. That could lead to worries for businesses that rely heavily on the mail for their operations, such as utilities, financial services firms, and phone companies. A total stoppage would wreak havoc with their business. A merely significant slowdown would be much easier to handle, but it would still be another blow in an already damaged economy.

DIFFERING ESTIMATES. In a systemic slowdown, credit-card companies would be at the greatest risk. On average, slightly less than 10% of their revenue comes from charging late fees -- a significant percentage. Many companies have already waived those late fees because of the postal delays. These companies were previously affected by the mail slowdown after Sept. 11, which were caused by the shutdown of airmail traffic. "A week of lost mail delivery will result in a loss of about 2% of their cash flows," estimates Moshe Orenbuch, an analyst with CS First Boston who follows credit card companies.

Not every analyst agrees. "A week's worth of delays would lead to only small charges," says Merrill Lynch's Michael Hughes, who also follows credit-card companies. Besides, says Bank One's Kelly: "We've seen that Americans are very creative. The week of September 11, some air-shipment companies created a truck network. Whatever happens, people will be creative and will be flexible."

Utility companies would be much less directly affected by a mail slowdown, because only a tiny portion of their revenues come from late fees. And besides, as Guzman & Co. analyst Patrick Comack points out, people will find ways to pay their phone bills. "We always pay the phone bill first because we're afraid of getting service cut," he says.

WHAT'S NEXT? Jeff Battcher, BellSouth's corporate communications director, agrees that the problem isn't significant right now. His company sends out 20 million pieces of mail and receives 15 million pieces each month. "There's a slight downturn in mail," he says, but not enough to affect the company's results.

The message that most analysts and executives are sending is that the mail must go on, even if it's slower than usual. A shutdown of the system would be disastrous, and isn't necessary at this point, the Postal Service says. As for it ever being necessary, there's just no way to tell. Jaffe and Kharif write for BusinessWeek Online in New York


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