US Postal Service 2014 Annual Report Download - page 21

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2014 Report on Form 10-K United States Postal Service 17
First-Class Mail
In 2014, the long-term decline in First-Class Mail volume continued, albeit at a slower pace than previous years, with a decrease
of 3.3% from 2013. In 2014, First-Class Mail represented 42% of operating revenue, as compared to 43% of revenue in 2013
before the change in accounting estimate, and 44% in 2012.
The decline in volume of First-Class Mail in 2014, our most profitable service, was offset by the exigent price increase which
became effective in January 2014.
Price increases for all services in the First-Class Mail category are generally capped at the rate of inflation because these
services are classified, by law, as Market-Dominant.
Standard Mail
Standard Mail generated the greatest volume, at 51.7% of the total, but represented only 25.7% of operating revenue in 2014.
Standard Mail revenue increased by $513 million, or 3.0% to $17.4 billion in 2014 compared to 2013, on a volume decrease of
495 million pieces, or 0.6%. Increases in Standard Mail revenue were a result of the exigent price increase implemented in
January 2014. While volume remained relatively flat, mail is proving to be an especially resilient marketing channel and its
value to America’s businesses is increasing due to better data and technology integration.
Standard Mail represented 25.2% of operating revenue in 2013 after consideration of the change in accounting estimate.
Political mail volume coupled with a modest improvement in the economy resulted in an increase in Standard Mail revenue by
3% in 2013 compared to 2012, on a volume increase of 1.6%. Political mail revenue of $263 million from October and
November, 2012 mailings are included in our results for the year ended September 30, 2013.
Price increases for all services in the Standard Mail category are generally capped at the rate of inflation because they are
classified, by law, as Market-Dominant.
Shipping and Packages
Shipping and Packages revenue continues to show strong year-over-year growth. Shipping and Packages are predominantly
Competitive services which can be priced to reflect current market conditions, although some Market-Dominant services subject
to price caps such as First-Class Parcels and certain other package services are also included in this category. Responding to the
opportunity created by the growth in packages shipped for consumer purchases made online, we have been able to capture an
increasing share of this newly created volume. We continue to capitalize on the competitive advantage we have in providing
“last mile” service for e-commerce fulfillment markets. Ground shipping services have proven to be very popular in e-
commerce fulfillment, as companies push to keep their costs down. In addition, new postal services and successful marketing
campaigns have helped fuel this growth. Shipping and Packages revenue grew 9.1% in 2014 and 8.7% in 2013, when compared
to the previous year. Additionally, in order to further grow revenue, to accommodate the surge in volume and to avoid service
disruptions, we implemented Sunday delivery service in some U.S. markets during the first quarter of 2014 and are currently
serving seventeen major U.S. cities with Sunday package delivery.