Direct marketers can count on a small rate increase on direct mail in the coming year, but it’s Congress that Postmaster General Patrick Donohoe put to the test today in announcing a record $15.9 billion net loss for the United States Postal Service during its fiscal year ended September 30.
Two payments totaling $11.1 billion that USPS was required to make to prefund retirees’ health benefits fueled the deficit, which compared to a loss of $5.1 billion last year. The legislation proposed by Donohoe and others would remove the obligation from USPS and allow it to sponsor its own healthcare program for its employees and retirees. It would also clear the way for the agency to determine its own delivery frequency and offer non-postal products and services.
“We need a resolution and a refunding of our overfunding of the federal employee retirement system. There would be an $8 billion change in our results if we [could move to] five days of delivery and healthcare removal,” Donohoe said. “We need to act in the lame duck session and get this passed and we will get back in good financial shape.”
Positives reported by USPS Chief Financial Officer Joseph Corbett included an 8.7% increase in package shipping business and some $500 million in election-related revenue. Revenue from direct mail revenue and First Class mail each declined by 4%.
Donohoe said that direct marketers could expect a rate increase in 2013 in line with inflation, which was 2.2% at the time of this writing. He also encouraged direct marketers to combine mail with their digital appeals. “The key thing for [direct marketers] is to focus on growth in using direct mail along with other digital options and innovate,” he said. “We’ve seen some really good examples and everybody in the industry needs to think about moving in that direction.”
USPS currently has in-market a Black Friday/Cyber Monday promotion offering online merchants 2% postage discounts on Standard and First Class mailings if they include mobile barcodes, such as QR codes. Last May, the organization named Paul Vogel to the newly created position of president of digital solutions to explore new programs to combine mail with digital communications.
Donohoe noted that the agency would attempt to retain its market share of direct mail and that it expects growth in priority mail and shipping. Packages, he added, would continue to be delivered six or seven days a week should legislation be passed allowed a reduction of mail delivery to five days a week.