Will Catalogs Survive the Postal Mess?

The umpteenth annual reform of the postal system was proposed recently by the U.S. Postal Service. Every stakeholder is weighing in with its opinion: the media, both in support and in opposition; every user class espousing its interests; the postal labor force asking for higher wages and shorter hours; postal management with “new ideas” to cut costs and, finally, the public’s representatives.

Don’t you wonder what the postal service would look like today had it been revised using the plan of, say, a year or two ago?

The problem is that the USPS does need reform. Times and technology make the current system a dinosaur. Without reform not only will the postal service suffer, every stakeholder will suffer. I’ll leave it to others to make their cases. I want to discuss the effect for catalogers – why it’s essential we make the case for our industry and your company. Simply put, the question is how will cataloging survive without a strong and relatively inexpensive postal service?

Many think that the main reason for the world’s large and vibrant catalog industry is this country’s entrepreneurial spirit. While that is important, I also think having among the lowest postal rates in the world has played an equally important role in our success.

The importance of low postal rates. Only 15 years ago a U.S. cataloger could mail a 64-page catalog on 50-pound paper for less than a dime. That was not true anywhere else in the world. Indeed, that rate was probably a fraction of what a comparable book would have cost elsewhere. U.S. postage today is 115% higher than in 1985. If catalogers hadn’t found ways to cut other costs, many would have disappeared by now.

Where did the cost savings come from? They came from operations, creative, marketing and merchandising. Operations efficiencies came from several areas such as developing better pick and pack systems. Creative found they could still create great books on lower weight and grade paper. Marketing increased response rates, especially for prospecting through cooperative databases and improved house file maintenance. Merchandising improved gross margins, though sometimes pushing the retail-pricing envelope.

However, there’s not much left to be wrung out of a company’s cost structure. This does not mean there isn’t room for more improvements, but they won’t cover rapidly rising postal rates.

Electronic impact. Some think that significant cost savings will come from catalogers’ interactive marketing, specifically through using e-mail to lower marketing costs by eliminating paper and postage expenses. Operations savings will be increased by eliminating customer service reps as the customer enters orders and systems notify them of shipments, etc.

Though there will be some savings, because of slow transmission of data the ability to market on the Web effectively will not offset rising costs for at least five more years.

Does anyone question that a catalog is the No. 1 way to drive Web traffic? Name a company that relies or relied solely on e-mail marketing, and you’re probably naming an extinct company. To be effective in both channels you must continue to mail, not only to your paper customers but also your Web customers. Cut your catalog mailings, and you’ll have lower overall sales, I guarantee!

What should you do? A weakened postal service surely will result in higher postal rates. As postal revenue drops, we’ll all see a decline in the level of service. The poorer service will lead to declining response rates and lower sales. At the same time, higher postal costs will depress most companies’ bottom line to breakeven or below. The result is that a weakened postal service likely will cause many marginal catalogers to disappear.

What makes these scenarios so scary is that most catalogers just think someone else will solve the problem. They sit around and grouse at conferences or meetings and hope someone else will take care of it.

Everyone should become proactive. It is useless to sit back and wait for someone else to take up your cause. Unfortunately, most of the decisions will be made in Washington. This means that to be effective, one has to actively support lobbying efforts that will protect the interests of catalogers and all direct marketers.

Contact organizations such as the Direct Marketing Association or Association for Postal Commerce (Postcom.org) and find out how you can get involved. You also can contact your representative and senators, telling them why a vibrant postal service is important to their constituents, that reform is in everyone’s interest.

If you don’t get involved, you may not be around long enough to bellyache about the next postal increase. This applies to everyone whose livelihood is tied to mailing catalogs, not just catalogers.

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