Small-Business Owners Could Take a Huge Hit If USPS Financial Troubles Continue

Photo to accompany story about how USPS restrictions could harm small business owners. Kyle Grillot / AFP via Getty Images
Protesters are pictured outside a United States Postal Service location in Los Angeles, California, on Aug. 22, 2020.

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To cope with the recession brought on by the pandemic, many small-business owners have turned to online sales to boost revenue, relying on the U.S. mail to deliver their goods to customers. But that may be in jeopardy as the Postal Service faces financial hardship and finds itself in the middle of a political fight.

Without the USPS services they rely on, some entrepreneurs say they’d be forced to use private shipping companies at much higher rates, and potentially have to pass that cost on to customers.      

The USPS has lost $80 billion since 2007, as Americans abandoned written mail in favor of email and social media, and reported a net loss of $2.2 billion in the third quarter of 2020. But should the USPS be run like a business, or an essential government service? It is not a new debate.

The House of Representatives passed last week a bill, voted by the Democratic majority and some Republicans, that would give the Postal Service $25 billion in emergency funding, but there’s little chance the measure will pass in the Republican-controlled Senate. Additionally, the President has been repeating an unfounded claim that voting by mail is at risk for fraud, and the USPS has become embroiled in a confrontation between the parties.   

Without additional funding, the Postal Service may have to cut or delay its mail-delivery schedule even further than it already has. While it is in no immediate danger of closing down, members of Congress have expressed concern that it might.  

Meanwhile, people whose livelihood depends on a reliable U.S. mail system are worried. 

Sarah Rose, an artist who sells prints on Etsy and Instagram, strongly favors using USPS services over private competitors. “By using the USPS, I can send an illustration across the country for about $2,” she says, “whereas it is around $10 for UPS Ground and about $13 for FedEx Ground. I can send paintings for about $35 using the USPS, whereas UPS or FedEx Ground are over $100.”

Sarah Rose, an artist who sells prints on Etsy and Instagram, favors USPS over private shipping companies.

If she had to switch mail carriers, Rose says, she would have to raise her prices “substantially” or charge additional shipping fees. With many of her customers in the 18 – 24 age range, she says she wants to keep her shipping costs to a minimum and bake them into the price. People are more likely to purchase, she says, if there aren’t additional shipping costs.

Back in April, the chief executive of Shippo, a company that helps businesses optimize shipping, wrote in TechCrunch that “if we let the Postal Service die, we’ll be killing small businesses along with it.”

Without it, Laura Behrens Wu wrote, “given the drastic differences in daily operations and infrastructure between the USPS and private carriers, small businesses would see shipping costs increase significantly, in some cases by more than double.”

LC Foods, a health food bakery based in North Carolina that sells its goods online, is in the same boat. “We have already started shipping more packages via other avenues and would have to change our policy for shipping the fastest and least expensive way to our customers,” Leah Pierce, the company’s office and customer service manager, says.

“Not only would we suffer as a company, our customers would also suffer,” she adds.

Craig Nugent, manager at Empire Outfitters, a custom knife and outdoor gear shop on New York’s Long Island, shares a similar sentiment. His business currently does not charge customers for shipping. Instead the cost comes out of the company’s profit, with shipping costs an average of 10% of the retail price. If the company had to switch to UPS, Nugent estimates that shipping would increase to around 25%. 

As Nugent puts it, “We would have to start charging for shipping or incorporate the shipping into our retail price. Either way the consumer would end up paying for it in the long run.” 

With e-commerce valued at $500 billion a year in the U.S., the Postal Service plays a vital part in keeping the economy running. (It also handles almost half — 48%, to be exact — of the mail sent in the entire world.)  

But potentially higher prices aren’t the only possible headache here. Shipping times might increase, as well. Nugent explains that, on average, USPS takes between one to three business days to deliver, while UPS Ground can take up to 12 days.

While much is still unknown about the future of the USPS, one thing is abundantly clear: Small businesses still reeling from the lockdowns might not have the means to survive in a world without it.