Mailers Mull PRC Recommendations

Mailers responded with mixed feelings after letting the Postal Rate Commission's recommended mailing rates sink in for a week. Though the PRC cut by a third the overall increase recommended by the U.S. Postal Service, many of the individual rates went up.

Barry Brennan, director of postal affairs at the Mail Advertising Service Association, Alexandria, VA, said Standard-A mailers should be happy with the relatively low 1.2 percent average increase for regular mail and 2.2 percent increase for enhanced carrier route mail.

“Although no one likes to face rate increases of any kind, the PRC recommendation may be the lowest possible while still giving the postal service needed revenue to break even over time,” he said.

Jerry Cerasale, senior vice president of government affairs at the Direct Marketing Association, applauded the PRC.

“From the DMA's perspective, the PRC did a good job and they reduced the overall increase,” he said.

Brennan said the reduced increase for automated categories should be good news for mailers who have made substantial investments in automation equipment to conform to classification reform requirements.

And Robert “Kam” Kamerschen, chairman and CEO of Advo Inc., said the rates should have a positive effect on his business.

“We are pleased that their recommended rates are consistent with the postal service's new rate-making approach, including toward advertising mail, and are less than the rate of inflation,” he said.

In addition, he said, the recommendations, if accepted by the USPS' Board of Governors, would be the smallest increase ever for saturation mail, which is how Advo mails.

The PRC also passed recommended worksharing discounts based on the postal service's original proposal. These discounts apply when 50 or more presorted parcels are entered at sectional center facilities or destination delivery units.

Drop-shippers welcomed the PRC's recommendation since these discounts will enhance their value propositions, and it is almost certain that USPS customers will seek out these companies to help them receive equal or better discounts.

“We've got a mix of both pound-rated and piece-rated mail, and we kind of look at it in both categories as a very favorable recommendation,” said Steve Korol, vice president of sales at Donnelley Logistics Division, Chicago, which drop-ships a mixture of Standard-A and Fourth-Class mail to 235 SCFs. “The PRC recommended keeping the gap between business mail center and SCF discounts consistent, which ultimately [will] generate more gross postal-saving dollars, which enables mailers to do more drop-shipping.”

Korol said that if there are more gross postal savings available, Donnelley may be able to deliver to even more SCFs and get deeper into the system — and “at very, very efficient rates.”

Robert J. Posch Jr., vice president of legal affairs at Doubleday Direct, Garden City, NY, said the recommendations were much better than previous increases. Doubleday ships books at the Bound Printed Matter rate, which increased from 85.8 cents to 90.3 cents for a 2.5 pound parcel shipped to zone three, for example. He said the recommendations are a positive reflection of what is happening at the postal service.

“In 1989, we had our second massive hike, and the costs were out of control,” he said. “Since the industry has lobbied for a number of niche discounts in the Standard and Parcel Post areas, it has enabled the postal service to grow its business so strongly despite the losses from e-mail.”

Posch said direct marketers and mailers have benefited from back-to-back below-inflation increases. And he agreed with the PRC that the increases should not be implemented until January.

Others Voice Their Concerns

Not all of the PRC's recommendations were good news to mailers.

According to the DMA, the PRC changed Standard-A rates to benefit lighter-weight pieces, especially in the heavy ECR saturation category. Lighter-weight pieces include credit-card offerings or digest-size catalogs, and heavier-weight pieces include larger catalogs or mail sent by companies such as Montgomery Ward, L.L. Bean and Advo.

For example, although the per-piece charge for Standard-A ECR pieces above the minimum per-piece rate was lowered 3 cents, the per-pound rate increased from 11 cents to 13 cents. In addition, the PRC reduced the pound charges from current rates, but they still aren't as low as the USPS' original request.

“The postal service came into the case showing that the pound rates were too high and they had recommended virtually across the board lowering the per-pound charges,” the DMA's Cerasale said, “but the rate case disagreed with the evidence. They didn't think the USPS proved that case and, therefore, adjusted the pound charges upward.”

The PRC also hurt Standard-B mailers, increasing the USPS' recommendation for this category from 9.2 percent to 12.3 percent on average.

“We are disappointed totally that the parcel rates have come in higher than what was requested,” said Chris Rebello of Current Inc., a $150 million catalog company that uses the USPS to mail Standard-A catalogs and ship merchandise. “We were actually thinking they should come in lower.”

Standard-A parcel mailers who mail parcels under 1 pound also didn't fare well. A 10-cent surcharge may be added to each parcel.

Aaron C. Horowitz, director of government affairs at Cosmetique, a Standard A-parcel shipper, said that although it is too soon to tell whether the recommendations will affect what it charges its customers, he said he will be “affected greatly by the 10-cent surcharge.”

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