Post Office, Mailers Are at an Historic Juncture

Business mailers have been part and parcel (ahem) of the Post Office’s history since at least the 1840s, when local retail circulars came into being. After that came catalogs, which helped establish parcel post. Today, business mailers—including First Class financial mailers, Standard Mail advertising mailers, and e-commerce package shippers—are the U.S. Postal Service’s No. 1 customers.

Of the $46 billion dollars USPS collected in postage for market-dominant products in which it owns a monopoly, nearly $36 billion was accounted for by Standard Mail, Flats, and presort First Class Mail paid for by business mailers.

The symbiotic relationship between USPS and bulk mailers is currently at an historic juncture, with the USPS struggling for its very survival and mailers dealing with an unprecedented “exigent” rate increase to help offset a steady 30% decline in First Class Mail and competition from the Internet. As it concluded its most recent fiscal year last September, the Postal Service declared a net loss of $5 billion and had posted losses in 19 of its previous 21 quarters.

Some critical numbers in today’s situation for both direct mailers and the Post Office:

4.3% Amount of the exigent increase that went into effect in January, along with a 1.6% increase attached to the Consumer Price Index

This first-ever exigent—or emergency—increase was approved by the Postal Regulatory Commission with the stipulation that it be removed in two years or with the collection of $2.8 billion in incremental income. The USPS has filed suit to make the increase permanent, while mailers have gone to court to have it removed.

$40 billion Amount by which Postal Service liabilities exceed its assets

This was brought on by declining mail volumes, as well as obligations to pref-und its Retirees Health Benefits (RHB) well into the 21st century and its over-funding of the Federal Employees Retirement System (FERS).

$5.6 billion Approximate amount the USPS is required to pay into the RHB fund annually, a payment it has failed to make in each of the last three years

The pre-funding program mandated by the Postal Accountability and Enhancement Act in 2006 heavily preloaded payments in the first 10 years of the plan.

$15 billion Amount the Postal Service owes to the U.S. Treasury—its lending limit

0 Amount of tax dollars USPS receives from the federal government

$487 million Increase in 2013 Standard Mail postage that contributed to the Postal Service’s first revenue increase since 2008

That last number is clear evidence of the continued viability and popularity of direct mail. In an increasingly digital age, marketers keep registering results that make them want to maintain a presence in people’s mailboxes. How much more of their budgets they continue to invest in the medium, however, will depend on what happens in Washington in the coming months. Postal reform bills have been introduced in the House and the Senate, but their chances of passing during this election year are small. Contentious issues continue to separate the key stakeholders:

  • Labor unions carry on the fight against the consolidation postal facilities and loss of jobs.
  • Mailers favor consolidation and other cost-cutting moves, and therefore remain at loggerheads with unions.
  • The Postal Service insists that the 4.3% exigent increase must become a permanent part of the rate base, while mailers just as strenuously insist that such a move would force them to slash volumes and ultimately shrink USPS revenues.
  • All three parties agree that the RHB pre-funding must be re-amortized—but that’s a course that must clear several bureaucratic hurdles.

What’s undeniable is that the nation’s second oldest government agency, which was transformed into a government-run monopoly enterprise in 1970, will evolve into another form of business/government enterprise based on events now taking shape. What it becomes will have a profound effect on what the future holds for catalogs and direct mail.

Related Posts