Speaking for the Postal Service's Best Customers

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Who are the Postal Service's most important customers?  With First Class Mail volume plummeting, the Post Office must depend on Standard Mail and direct mailers for cash flow.  Long-time Washington hand Joe Schick, director of postal affairs at Quad/Graphics, discusses why it's of the utmost importance for bulk mailers to bring their influence to bear in Washington.


Al Urbanski:
Welcome, everybody, to another DC Direct podcast. This is Al Urbanski, senior editor of Direct Marketing News.

Postal issues are big in the headlines today, especially with direct marketers and our direct-mail subscribers, and we have with us today one of the gentlemen who's been following this for a long, long time—some 30 years—for one of the big companies, Quad Graphics. We have Joe Schick, who is VP, Postal Affairs for Quad. Joe, thanks for joining us today.

[00:00:34]

Joe Schick: Oh, you're welcome, Al.

[00:00:36]

Urbanski: So, Joe, obviously there's so much going on with postal. But just this week, it seemed like that maybe there was a—maybe some kind of a break, some kind of a possibility for legislation. Darrell Issa, who was kind of, you know, sitting on his bill and didn't have a lot of Democratic buy-in with it, tried to get a markup together. He's still doing a little with the Dems. But just give me your overview of what's ahead for postal legislation, if anything, this year.

[00:01:03]

Schick: Well, I think that the chairman of the House Committee, Chairman Issa, decided that he wanted to try and get something done this year, since he's going to no longer be the chairman at the end of this year, and he decided to take what the President had proposed in his budget and bring it forward, which in many ways were Democratic ideas, including the five-day issue.

And he basically got stonewalled this week because the five-day issue is one that the unions did not like. The proposal also included making exigent prices permanent, which obviously the industry didn't like. So there was a pretty big uproar, and as a result, the scheduled markup for Wednesday was canceled, and the last I heard it was kind of indefinitely canceled. So it puts a damper on that from the House side.

The Senate bill is pretty much in limbo right now, because both the labor unions and the mailing industry aren't real pleased with it. So right now, we're kind of in a stalemate, and ... [?] [CROSSTALK]

[00:02:17]

Urbanski: Joe, let's go back to—I'm sorry.

[00:02:19]

Schick: Go ahead. I was just going to say that [we're] in a position where it's still questionable whether anything can get done this year.

[00:02:26]

Urbanski: Yeah. I wanted to go back to the issue of the five-day delivery. I find that one fascinating because it's one of those areas where you have some agreement, both from the letter carriers and the big mailers, right? Because obviously, for obvious reasons, the letter carriers would be against it—fewer days to be out on the streets, making a salary. But mailers, it's less service for them, right? So what is the attitude on that issue among mailers?

[00:02:53]

Schick: Well, I think it varies basically because—by product types and by the type of business you're doing through the mail. So, originally you had folks who did prescriptions by mail who definitely didn't want to see Saturdays go away. The Postal Service amended it to allow for that. The newspapers definitely don't want it to go away. Many of the weekly publications don't want to see it go away. Likewise, a lot of the retailers who do a lot of sales that have a need for Saturday delivery.

On the other hand, you know, a lot in the mailing industry who were opposed originally just because they didn't want to lose another day of basically doing business with a consumer said, "Look, we can essentially live without Saturday if it's included as part of a bigger overall cost-cutting package by the Postal Service, and it's done at the end of that cost-cutting process"; because the industry as a whole, and Quad Graphics in particular, said that, "Look, we can manage around service cuts and losing a day of delivery, but what we can't manage around is pricing increases over the rate of CPI," which seems to always be the alternative—that if you don't give up Saturday, you're going to get more price increases. So that's kind of the long and short of it for the industry, I think.

[00:04:15]

Urbanski: Okay, so lesser of two evils?

[00:04:17]

Schick: Correct.

[00:04:18]

Urbanski: So this brings to mind another issue that has been bandied about a lot, about cutting workforce at the Post Office, and that is a cluster box. And the cluster boxes, for people who aren't familiar with them, would be a centralized location. You know, I live in New York City, and we all have cluster boxes in our apartment buildings, in the lobby, right? But it's that kind of an idea that would be transferred out to suburban areas, and so you wouldn't really get mail to your door anymore. So that raises issues for everybody, I think, involved in this chain, right?

But talk about how mailers feel about it, because I've heard a lot of them not really in favor about this. They're worried about people actually getting to the boxes and opening them on a regular basis and getting in their hands the promotions that they want them to have on a certain day.

[00:05:03]

Schick: Yeah, it's kind of an interesting thing, because nobody really talked about this before. And to your point, there [are] cluster boxes in play today in many locations, not just in apartment buildings, but in condo developments and some new subdivisions. So nobody, to my knowledge, had really been thinking about the impact on response.

And all of a sudden, now that it got brought up publicly again, everybody is focused on it, and that's been one of the questions. If you move the mailbox from the house to the curb, there's probably not a big impact, because most of the deliveries today are at curbside. But if you now move them further away from the house to a collection or to a cluster box area, you know, does that cause people to throw mail away when they pull it out of the mailbox [and] they've got some garbage cans close by, and they don't even look at it or bring it back into the house? And, obviously if that happens, what does it do to the response rates?

[00:06:00]

Or even if people don't pick up their mail every day, how does that affect response rates and the way folks would order from a catalogue or a direct mail piece? So now it's become a big issue. The industry would like the Postal Service to consider just kind of holding off on any ideas of moving in that direction too quickly until we can all take a look at it.

And I guess my message to the industry would be: “The ability is there today to look at files and look at addresses by delivery type.” There's a code in the delivery sequence file that provides that. And I think folks can probably start doing some database investigation here to watch the response and see if there is any correlation between lower response and different types of delivery, whether it's at the door or at the curb or in a cluster box.

[00:06:58]

Urbanski: Yeah, that'll be something interesting to watch. Now, you know, and there's—look, there's some panic going on, and there's some resentment. It's like, "Eh, you know, they own the mailbox." And there's talk of, "Well, what if they didn't? What if there was another way to get there?"

Now, I know that, for one, Bloomberg Businessweek does alternate delivery of its magazines. What about the topic of alternate delivery? Is it something reasonable? Is it something that actually could come to be?

[00:07:22]

Schick: Well, it's interesting, because every time the Postal Service raises prices by X percent, the industry reacts, or every time the Postal Service talks about cutting service, whether it's Saturday or something else, everybody reacts and turns to the possibility of using an alternative delivery system; whether it's a newspaper or whether it's a company who does hand delivery in metro areas.

Is it a viable alternative? Yeah, in some cases it is, and there's a lot of things that have to be considered, not the least of which are the weight of the publication, where your delivery is, you know, what happens to the deliveries that can't go through an alternate delivery company; maybe because they're rural addresses and tougher to get to, and other things to be concerned about.

But I think that given the fact that we're talking about an exigent price increase that could be baked into rates permanently as base pricing, given the fact that Saturdays could go away, given the fact that load leveling has in some ways reduced the amount of standard mail that can be delivered on a Monday, there's a lot of things that people are considering, and they're looking at whether there's a practical way to get mail delivered to the consumer, not using the Postal Service.

And, you know, many folks think it's an easy thing to do. It's not. There's a lot of things that have to happen. But I think you're seeing the industry doing some investigating right now, and trying to at least come up with some ideas on what might be able to be done, and in what markets it might make sense.

[00:09:06]

Urbanski: Yeah, interesting. Well, to wrap up, Joe, so there was an earnings call today. The Postmaster General and his CFO seem to be very clued in to the standard mail and the advertising mail customer. But, you know, I'm looking at total revenue for the first quarter, and the biggest bar here is first-class mail still. Even though there's a decline in first-class mail, we know that that's where they make their highest margin, $14.4 billion to—I believe it's, yeah, it's $8.8 billion for standard mail. So do you guys have a lot of juice? Do the big mailers have a lot of juice at the Postal Service?

[00:09:45]

Schick: Well, I think we do to some—in some respects. However, I think we've seen kind of a changing in the attitude of the Postal Service from the standpoint of really looking at their own business first, which they need to do. But in some ways it's at the expense of the industry, or it's done in a way that causes it to be much more difficult for us to do business with them regardless of how much product we put into the mail.

Now, with that being said, look, we get good service.  There's a lot of good things that happen on a day-to-day basis, but again, we have to be considered—we have to consider what we're looking at from a pricing and service perspective going forward, and, you know, we have to react accordingly.

[00:10:38]

Urbanski: Great. Joe, thanks very much. And just before I let you go, what's your own personal outlook for postal reforms? I know you won't commit to anything, but is there a chance that maybe in the lame-duck session folks who aren't up for re-election could get something done?

[00:10:54]

Schick: Yeah, I think, you know, I'm involved to a certain extent. But I think the folks that we work with with the Coalition for a 21st Century Postal Service, who are much more experienced on the legislative side than I, kind of look at it from the perspective that there's probably two opportunities the rest of the year. One would be before the August recess, which is probably not going to happen.

But the other one would be during the lame-duck session, which is where postal legislation seems to happen, when and if it does. So I think that's what most people are pointing toward, and hopefully if that's the case and it does happen, we end up with something that we've all agreed to that's workable for the industry and the Postal Service and its workers, and not something that just gets cobbled together at the last second that does more harm than good.

[00:11:48]

Urbanski: Yeah. Well, one can only hope. Joe, we have to wrap up now. Pleasure to talk to you, as always.  Folks, this is Al Urbanski for DC Direct signing off with Joe Schick from Quad Graphics. Joe, thanks again for your time.

[00:12:02]

Schick: You're welcome, Al.

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