The Postal Regulatory Commission has approved a Negotiated Service Agreement for Potpourri Group, publisher of more than a dozen catalogs selling gifts, apparel, pet products, and hobby accessories. It’s the first NSA that the U.S. Postal Service has worked out with a catalog company, and it could lay the groundwork for more to follow in short order.
“The Post Office is required by regulation to make this same business deal available to any other company that is ‘similarly situated,’” says Potpourri SVP Marketing Robert Webb, who worked tirelessly to craft the deal over the past 33 months. “I’m not sure of the exact definition of ‘similarly situated.’ The details of the deal will differ based on specific business components. But I’ve been told that if a similar company came forward, it would only take months to work a deal.”
Potpourri’s five-year deal with USPS awards it rebates based on a tiered structure of carrier route volume increases. Eligible volume up to 10% above a quarterly baseline will receive a 10% rebate from published rates; incremental volume between 10-18% merits a 15% return; and volume exceeding 18% of the threshold activates a 20% rebate.
Key to consummating a deal was working out a volume baseline that didn’t penalize increased mailings from the previous year. “The Post Office has always given you a rebate if you mailed more than you did last year,” Webb says, “but we pointed out to them that, if we did it that way, we’d only be able to do a one-year agreement. Instead, we were able to do a five-year deal, while most NSAs only last for three.”
The installation of the exigent rate increase plagued many catalogers with nightmarish visions of 2007, when a category rate increase put nearly a third of them out of business. January’s additional 4.3% increase in rates led many to worry that they’d be unable to afford prospect mailings to keep building their customer files, leading them inevitably into what AmeriMark President Louis Giesler has called a “death spiral.” But the Potpourri deal represents new life for prospecting.
”The real opportunity for us—for any cataloger—is increasing our prospect mailings,” Webb says. “We only earn the rebates if we mail incrementally more catalogs, and most of those will be devoted to prospecting.”
That’s music to the ears of catalogers, who are delighted with the outcome of the deal, says Hamilton Davison, president and executive director of the American Catalog Mailers Association. Potpourri’s NSA “signals a real interest in catalogs by the USPS, but it also shows the Postal Service understands cataloging’s distinct and unique business model,” Davison notes. “With the correct set of incentives, catalogers will mail more aggressively. They’re actively looking for ways to put more volume into the Postal system. This represents one solution.”
Until Potpourri stepped forward, no cataloger had bothered to enter the NSA process because of the time and expense involved. Webb says that he was advised to engage a Washington law firm if he expected to have any success in securing a deal—advice he ignored and that he figures saved his company up to $900,000 in legal fees. “We approached this as a business deal, like working with a paper mill or a printer. Once we got an agreement done, we engaged counsel to take us through the approval procedures,” Webb explained.
The result could be the proverbial win-win-win situation—a good deal for Potpourri, for USPS, and most likely for other catalogers. “This is a huge deal for our business,” Webb says. “We’re going to mail tens of millions of more books.”