Catalogers and Standard-A mailers expressed discontent at this week’s announcement that the U.S. Postal Service may raise its rates an average of 7.7 percent next year. Because of this, they may send fewer catalogs this year and focus on their e-commerce strategies instead.
The rate case includes very high rate increases for all categories of mail used by direct marketers, while the average First-Class rate will increase only 3.6 percent. The cost for a First-Class stamp would go up only 1 cent, to 34 cents. In the last rate increase, which was implemented on Jan. 10, 1999, First-Class mail increased 3.3 percent and the average increase for Standard-A mail was under 2 percent.
“The postal service is trying to shove more business to the Internet, which is a slap in the face to mailers who mail Standard-A,” said Dan Minnick, vice president of postal and industry services at Experian Direct Tech, Schaumburg, IL. “[Standard-A] is the single chunk of the USPS’ business to have any growth potential.”
Jerry Cerasale, senior vice president of government affairs at the Direct Marketing Association, said the USPS shouldn’t be raising direct marketers’ rates, particularly now, “at a time when more and more companies are moving to the Internet and as more Internet companies are starting to use direct mail for their marketing purposes.”
Cerasale said the “USPS is probably trying to protect First-Class mail volume.” However, the “area to try and look for growth and drive new markets is Standard-A, and our first impression is that the USPS did not do a good job in this case.”
Jay Reardon, systems director of direct marketing services at Providence Health System, Seattle, said he was surprised that nonprofit Enhanced Carrier Rates will increase more than 14 percent, especially since his company worked hard with the USPS to achieve worksharing discounts in the category. Providence is a large nonprofit community hospital group. Because of the increase, Reardon said, some of the hospitals in his group may not be able to use direct mail as means to identify people who want to support the institution.
While many catalogers hadn’t had time to dissect the rate case completely, they expressed optimism that the Postal Rate Commission will work with the numbers.
“It’s such a long process. You just don’t know how it is going to work out,” said Charlotte LaComb, a spokeswoman for cataloger Land’s End. “In the end, however, we hope there is very little in the way of an increase.”
Of concern to many mailers is the fact that the USPS used outdated fiscal year 1998 data to come up with its figures. Many had hoped the agency would wait until February or March to file the case so data from 1999 could be used.
“The USPS is using obsolete cost and revenue data from fiscal year 1998 to project ahead to fiscal year 2001,” said Neal Denton, executive director of the Alliance of Nonprofit Mailers. “The stale 1997-1998 data ignores the effects of the billion-dollar rate hikes of January 1999.”
Robert E. McLean, executive director of The Mailers Council, a coalition of the nation’s largest mailers, said that while higher postage costs are always a concern among America's businesses, the increase will result in millions of dollars in added expenses for his members.
“We recognize that increasing costs beyond the postal service’s control were major factors in the decision to file for a rate increase,” he said. “The result is that the cost of using the nation's mail system is becoming more expensive at a time when every competing technology is becoming less expensive.”
The council is conducting a productivity study of the USPS that is designed to encourage it to place new emphasis on improving productivity to contain costs and prepare for the inevitable mail volume losses expected as bill payment and other paper-based transactions move to the Internet. It will present its findings to Postmaster General William Henderson next month.