PMG Brennan Dialogs With Catalogers

Postmaster General Megan Brennan paid a visit to the American Catalog Mailers’ forum in Washington, tossed aside her notes, and invited the catalogers in the room to air their concerns. The interchange was refreshing, though not surprising. Catalogers wanted to know why the Postal Service couldn’t just tear all the red tape off of rates and let catalog volumes and mail revenues flourish. Brennan agreed with a lot of what they had to say, but reminded them, in essence, that unsnarling red tape and process delays is what she does for a living.

Brennan began by telling the group that one of her chief goals was to engage with key stakeholders in an effort to find ways to help the mailing industry grow in an increasingly digital age. To that end–despite the financial pressures still mounting on the Postal Service absent legislative relief–Brennan said her current budget includes $2 billion in capital spending compared to only $700 million last year.

“The reality is that we have 35 cents in assets for every dollar of liability. That’s not sustainable,” Brennan said. “Innovation is key for us. How can we give print that digital reflection? What can we do to grow catalogs?”

Catalogers weren’t short of suggestions, most of which focused on shifting to a long-term view of jump-starting the category. A discounted rate for prospect mailings, they have long argued, will pack more new customer names into their house files and guarantee more business for the Postal Service in the long run. Bob Webb, SVP marketing of the multi-catalog Potpourri Group, said internal data shows that for every dollar his company spends on postage, 65 cents in downstream revenue trickles into the Postal Service in stamps, postcards, and returned packages.

“I’ve said for years that you would be better off giving away postage [for prospecting] and losing money, because you’re going to make more in postage in the long term,” said GiftTree President Martin McClanan, who currently serves as chairman of the American Catalog Mailers Association (ACMA). “With PAEA [postal law], you’re held to standards normal businesses are not held to. If you were at another commercial operation, you’d be looking at the long-term contribution of the deal.”

Brennan agreed, but wondered if, as proposed internally, a two-year test of the prospecting rate might not be a self-imposed constraint. Indeed, answered cataloger Neil Sexton, COO of the Northern Safety Company. “Two years is more to protect you guys. We are in a race to get new catalogs into the system. To me, [the prospecting rate] is one of the simplest things we can all do together,” he said.

Webb and Potpourri Group triumphed last June in securing the catalog industry’s first Negotiated Service Agreement from the Postal Service, and both organizations have already seen fruits of the arrangement. Brennan said she had seen the numbers and was impressed, and Potpourri CEO Jonathon Fleischmann reported that the company was breaking ground on new 450,000 sq. ft. facility to handle new business it projects thanks to the deal. But securing the NSA was a long and hard road for Webb and Potpourri, and catalogers asked the PMG whether “similarly situated” catalog companies might be able to use the Potpourri deal as a template to quickly fashion ones of their own.

“If it’s a shorter road to pursue this by being ‘similarly situated,’ what does that mean?,” asked Webb. “If I mail only 15 million catalogs, is that enough? I’d like to think the Post Office would be committed to help any cataloger who’s interested.”

“You answered the question for me,” Brennan replied. “We need to listen to anyone who comes to us. We need to do anything to grow profitable volume for us. Now, it’s a matter of executing it.”

In discussing new moves at the Postal Service, Brennan mentioned the introduction of the Small Package Sortation System, or SPSS. The new machinery came as news to most of those in attendance, and aroused unpleasant memories in Quad/Graphics Director of Postal Affairs Joe Schick.

“I haven’t heard anything about this small package sorter,” Schick told Brennan. “One thing we’re dealing with right now is breakage on your bundle sorting equipment. I go back 12 years to when that rolled out and the Postal Service didn’t want us to get involved in that equipment. I don’t want to see us make that mistake again.” Brennan agreed Schick had a point and promised to take his suggestion back to her operations people.

The last PMG, Pat Donahoe, kicked and scraped and couldn’t get postal reform passed to clear some debilitating debits, such as prefunding the Retiree Health Benefits, from the Postal Service balance sheet. The current Congress appears even less inclined to agree on any legislation, but Brennan says she will take up the cause nonetheless.

“We’ve visited the Senate and the House and we’re trying to find common ground among key stakeholders.To get a bill a passed, we need to stick to key provisions. It will likely be a thinner bill than it was previously. We need some flexibility,” Brennan said, meaning that she would, like Donahoe, push for taking control of pricing in the future.

That’s not likely to wash with mailers, but ACMA president Hamilton Davison, who has been critical of the Postal Service for not joining in recent talks between mailers and unions, said postal reform is not necessarily out of the question. “If we get mailers and unions and the Postal Service on the same page, we could get you what you want,” he told Brennan.

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