Postal Alert: Magazines and Catalogs

New Postal Rates Announced, but it’s not Over Yet!

March 20, 2007—As everyone with an interest in distributing print by mail knows by now, new increased postal rates will take effect on May 14th, except for periodicals (i.e., magazines, newspapers and some newsletters) which have been delayed until July 15th.

The impact of the increased postal costs is likely to result in a decline in print volume—how big a decline will vary by mail category or class and the mailer’s ability to achieve the maximum postal discounts available under revised work-sharing rules.

Magazine Increase Delayed, but Not Forgotten

The USPS Board of Governors delayed instituting the new periodical rate until mid-July to allow publishers, printers and their software providers adequate time to update computer software and to cope with the complexity of a new complicated periodical rate structure.

The Postal Service had prepared in its May 6, 2006, rate increase request to the Postal Regulatory Commission (PRC) a single container charge designed to encourage magazine mailing efficiency. However, the PRC came back after almost a year of deliberation, with 55 different prices based on container type, point of entry and level of sortation. It is this more complicated structure that the USPS plans to implement in July. Many analysts feel that this structure favors the large publisher and printer but works to the detriment of the small publisher and the lower volume sheetfed commercial printer that prints a few magazines. It will take time and a postal expert to figure it all out. Best action for the small printer is to rely on postal software suppliers and experienced postal- smart consultants.

Catalog Postage Goes Up, Up and Up in May

Catalog merchandisers and their printers also face major postal increases—for some a going-out-of-business-inspiring rate hike of 40% on May 14th—if the current PRC recommendation sticks (technically an increase in the “standard mail” category. Concerned about this “rate shock”, the postal governors have sent this one back to the PRC for a second consideration. For now, catalog printers must prepare for the worst—there is a little more than a month to do it—and pray for the best.

Catalog merchandisers will also be hurt by increases in package delivery charges. Courier and express delivery services increased rates earlier this year; many have variable surcharges for changes in gasoline costs.

Also sent back to the PRC for reconsideration are the rates for non-machineable surcharges and the rates for Priority Mail flat rate boxes.

The PRC decision on First Class two- and three-once letters does not differentiate between machinable and non-machinable. The Governors believe this warrants further analysis to ensure there are incentives for mailers to provide letters that can be processed at lower cost on efficient sorting equipment.

The PRC recommended a rate of $9.15 for the Priority Mail Flat Rate Box, which is $1.05 above the current rate and 35 cents higher than the Postal Service’s proposal of $8.80. The Governors believe a rate below $9 would be more appropriate for this popular consumer and business product and would be cost justified.

An analysis of the distribution of printed products by the PrintCom Consulting Group indicates that upward of 55% of all domestic commercially printed materials at sometime in their life cycle are sent through the U.S. postal system. About 45% principally magazines, catalogs, direct mail advertising and transaction documents including the emerging trans-promotional materials are deposited directly from the printer, lettershop or mailing house into the postal stream. The internet and the alternative electronic media are vying with print for a share of this market.

Although it is too soon for a full detailed analysis of the impact of the combination of so-called postal reform requirements and the rate increase, it is clear that the changes about to be instituted will result in a decline in overall commercial printing volume.

Commercial printers will be well advised to analyze their key accounts to determine the impact of the postal changes on their customers and therefore, their print volume, while developing ways to more efficiently and cost effectively enter material into the mail stream.

And It’s Not Over Yet

While still choking over the current round of postal rate increases, quietly overlooked is the fact that the just-passed reform legislation which limits future postal rate increases to the Consumer Price Index (CPI) rate of inflation does not take effect immediately. Another request for a postal rate increase can be initiated under the old procedures and rules until December 2007. That still-available under-the-old-rules request is not capped by the CPI. James C. Miller III, Chairman of the USPS Board of Governors, in a March 19th teleconference said that he “would like to see one more rate case before the new regime begins.” Some analysts believe that the current hue and cry over the postal situation will make an old rules rate increase unlikely. However, others believe that the lure of avoiding the CPI cap will be irresistible. PrintCom believes that there will be another rate change under the old rules touted by the post office as an adjustment to stimulate mailers’ efficiency. Read: By early 2009 postal rates for at lease some classes of mail will have increased again at a rate greater than the CPI.

With changes in the work rules not clearly understood and shock waves of the rate increase still reverberating, it is difficult to come to grips with the full ramifications of the postal changes. As the dust settles, PrintCom will continue to monitor the implications of the postal changes and provide as much information as possible to its clients and others. Meanwhile, for printers whose products enter the mail stream --- time is of the essence, start action now!

Quick View Info Sources

It is critically important for publishers and printers to stay on top of the unfolding postal changes. Some postal information sources include:

USPS web sites:

• Business Mail 101 at www.usps.com/businessmail101/classes/welcome.htm

• Decision Tree at www.usps.com/businessmail101/decisiontres/decisiontree.htm

• Periodicals FAQs at www.usps.com/ratecase/periodicalsfaqs.htm

• MultiChannel Merchant Weekly at www.multichannelmerchant@pbinews.com

• DM News at www.dmnews.com

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Investigate the PrintCom Consulting Group’s custom tailored FYI/HARBINGER WATCH business information service. Call Bill Lamparter at 704-843-5350 or e-mail PrintCom@aol.com