Reject the PRC's recommended postage hike

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The Postal Regulatory Commission's proposed rate increase for flats mail and catalogs - anywhere from 20 to 40 percent - is flat out disastrous for direct marketing. It just doesn't make sense: Why would you want to jeopardize the future of the catalog industry and retail overall with such a knockout blow? And just when various states are debating do-not-mail bills on the lines of the successful federal do-not-call registry?

The U.S. Postal Service has recommended a 12.5 percent rate increase for flats to maintain its operational efficiency. Even that is a bitter pill to swallow for catalogers. But the agency at least understands the contribution catalogers and flats mailers make to the direct marketing industry, postal service and this economy. The PRC, on the other hand, is looking purely at the USPS' cost attribution without concern for the wider ramifications.

Let's consider the possible scenarios if the PRC's rate case proposals are implemented. Smaller catalogs, and there are plenty of them, will close doors. Larger catalogers will cut circulation or shutter books that are barely breaking even. And yes, there will be a shift to e-commerce. But the online channel and retail stores will lose a champion traffic driver. There's also the trickledown effect with ancillary industries that support catalogs. Printers, manufacturers, paper mills, freight and delivery companies, and photographers will be hit hard. Expect massive layoffs across the board.

More than 53 billion catalogs and flats were mailed last year. At stake is maintaining, or increasing, the targeted volume for this year and the period ahead. The USPS' revenue could take a hit, too. Reduced catalog mailing could lead to a loss of First Class mail from consumers mailing orders to catalogers. Fewer parcels will be shipped out as a result of fewer orders. And revenue from First Class mail such as statements, customer service queries and responses, and checks possibly will decrease.

The new rates for all postal mail are expected to go into effect May 6. We're not even talking about the effect of postage rate increases on nonprofit mailings and periodicals. Expect a similar dire situation to play out for these sectors.

A decision on the rate case is expected sometime this week. The direct marketing industry jumped into the fray a bit late. But it's a fine fight they're putting up. Industry leaders have dashed off letters to USPS Board of Governors Chairman James C. Miller III and Postmaster General Jack Potter as well as Dan G. Blair, chairman of the PRC. The Direct Marketing Association has also received plenty of mail. Let's hope the fax, e-mail and hard-copy letter campaigns works.

Ralph Drybrough, CEO of MeritDirect List Brokerage Services, White Plains, NY, spelled out the unfairness of the PRC's recommendations on a template letter distributed to his customers. The PRC's rates are five times the rate of inflation and twice that of the USPS proposal, he said. Many catalogers have already set their budgets for the year, anticipating an increase but not of this magnitude.

The USPS board of governors can accept, reject or modify the PRC's recommendations. We recommend the governors accept a rate case increase in line with the USPS' requests. Anything more and they risk redefining the face of cataloging to the detriment of American business.


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