Ever since 2007, when the Postal Service used new legislation to inflate rates for catalogers, which put a third of them out of business, catalog sellers and other users of the flats postal category have felt wronged by the United States Postal Service. That feeling intensified a few years later with the boondoggle of the Flats Sequencing System, or FSS, that employed expensive new machines intended to make flats processing more efficient. Instead, it did the opposite.
But relief for catalogers appears on the way. In recent talks with members of the Mailers’ Technical Advisory Committee (MTAC), USPS officials proposed to roll back some FSS directives causing price pain to catalogers and lowering flats volumes in postal facilities.
DMN has learned that, in meetings with MTAC officials, USPS revealed it intended to eliminate the FSS price cells with 2017 rate changes it files with the Postal Regulatory Commission. The Postal Service will raise the piece per pound threshold for using FSS, allowing catalogers to add more pages to their books or use higher-weight paper. It will also remove FSS pricing that was put into play in 2015 and return to 2014 pricing strategy for the category. The 2015 price change amounted to about a 4.5% premium.
“There’s been a lot of pressure put on the Postal Service by flats mailers to address FSS costs and pricing. We’ve had several meetings with them about it,” said Angelo Anagnostopoulos, VP of postal affairs at Grayhair Software and industry leader for analytics and data at MTAC. “When USPS last filed a price change, they made some of the FSS prep mandatory, and when you look at the pricing, it’s higher than carrier route rates. Flats mailers complained about the mandatory preparation and higher prices. They couldn’t understand the mandatory preparation requirement for a machine that has a higher cost.”
Disappointing outcomes from the FSS program has also had a negative impact on the Postal Service, whose chief goal with such mass-mailer initiatives is to increase mail volumes. But a study of 10.6 billion flat pieces conducted by the American Catalog Mailers Association (ACMA) showed that rate and processing cost increases caused catalogers to move away from FSS and decrease their mailing volumes.
“The Postal Service realized it was a mistake. They saw the mail start moving away, so they went back to the 2014 FSS price structure,” said ACMA President and Executive Director Hamilton Davison. “They’ll have to add in a few CPI increases, but the structure will probably be the one that existed in 2014.”
While these developments have lifted catalogers’ spirits as high as they’ve been since they formed the ACMA to combat high postal rates nearly a decade ago, there remain some unanswered demands on their agenda. One is an increase in the discount mailers get for building carrier-route pallets. Another is a new promotion from the Postal Service that will offer lower rates for prospecting efforts made by catalogers. Promotional mailings to potential new customers are the first things catalogers cut from their budgets when postal rates rise.
None of these changes to the flats pricing and processing systems are official yet, but the Postal Service is not denying them, either. “We continue to consider changes to the pricing of FSS, however, no decisions have been made at this time,” said USPS spokesman David Partenheimer when asked by DMN about proposed changes. “Final price and product decisions are within the sole authority of our Board of Governors and subject to PRC approval.”
Davison gives kudos to Postmaster General Megan Brennan and her staff for doing something about the declining volumes revealed in the ACMA analysis. “They felt they made a commitment they needed to own up to. They saw the mail start moving away, so they went back to the 2014 FSS price,” he said.
In so doing, Brennan and company dawned a new day for catalogers, and Davison can’t help but feel victorious. “USPS is ushering in a pro-growth policy to stimulate catalogs after years of anti-growth policy depressed catalog volumes,” he said. “We have been able to get them to understand that there is nothing wrong with this sector except poor national policy that has been encouraging catalog marketers to get out of mail, not invest in it.”