Mailing/Fulfillment - Postal Trends

Direct mail is still considered the marketing channel of choice by a vast number of marketers across verticals ranging from telecom and utilities to nonprofit, publishing and financial services. According to the Direct Marketing Association's “2012 Response Rate Report,” the rates for letter-sized direct mail (3.4 percent) were 30 times higher than those for email (0.12 percent). The belief that direct mail is dead or dying will have to be suspended for the time being.

USPS released preliminary financial results late yesterday showing net income of $61 million last month, the first month of Fiscal Year 2013, versus a budgeted loss of $244 million and last year's loss of $139 million.

If not for a $467 million charge for prefunded retiree health benefits, the agency's net would have been $528 million—a profit margin of more than eight percent on revenues of $6.03 million.

Those prepayments have been likened to an interest-free loan to the federal treasury that are designed to obscure the true size of the federal budget deficit.

While the Hostess Twinkie may not be as central to the U.S. economy as the mail, Postmaster General Patrick Donahoe sees uncomfortable parallels of iconic products within unworkable organizational structures. Like Hostess Brands Inc., where a labor impasse prompted the snack-food maker’s liquidation, the Postal Service, with 28 times Hostess’s workforce of 18,000, has been squeezed by labor costs and changing consumer tastes to the brink of extinction.

The post office’s insolvency is less imminent while no less ominous, with Donahoe projecting that the service expects to run out of cash in October without intervention from Congress.

The stakes are high for our industry, with 65 percent of all print distributed through the USPS system. What would happen if the system shuts down? Within the next year, that is a real possibility and we must not continue to ignore it. Postal reform means different things to different people, and the ticking we hear is either the countdown of the clock…or the countdown of a bomb that could explode our industry.

The thrill of running to check the mailbox will not be going away anytime soon. With the holidays upon us, it is the perfect time for organizations to use direct mail to reach out to consumers and form a connection. “The Big Thank You” campaign of The Bert Show in Atlanta, provides the perfect example of how moving the gesture of personalized mail can be.

The troubled Flats Sequencing System is saving hundreds of millions of dollars annually, according to a U.S. Postal Service claim. Based on information USPS filed recently in a lawsuit, the agency’s $1.3 billion FSS investment will pay for itself after barely three full years of operation.

“The Postal Service saves approximately $325,408 for each month of operation of each FSS machine,” USPS said in response to a lawsuit filed against it by the key FSS vendor, Northrop Grumman. “This is the monthly amount the Postal Service would have to pay employees to manually sort flats to delivery point sequence if the

A solution will not be easy;  the Postal Service already is cutting costs substantially, but far from enough. Congress must act on many of the common-sense steps already incorporated in House and Senate bills to put the Postal Service back on a path to prosperity.

First, USPS must be streamlined and restructured. Second, Congress must reform the Postal Service’s pension system and return money that USPS has overpaid. Third, the collective-bargaining process between USPS and its unions must be examined and reformed. Fourth, it is essential to reform the devastating retiree health care prepayments that the Postal Service must make.

One of the busiest days of the year for many direct mail firms comes eight days before Election Day as the cycle’s final mail pieces are about to drop. So what happens when that day coincides with one of the most powerful storms in recorded history and your firm is in its path?  

Several firms told C&E on Tuesday that they made the decision to move up their production schedules in anticipation of the storm. And millions of pieces of mail from campaigns across the country already went out over the past two weeks. Still, it doesn’t stop the worry

USPS managers have presented a plan for how they potentially can navigate their way out of this mess. It’s an ambitious plan, but it has a few big issues: about half of the financial improvements require “significant legislative change,” and Washington hasn’t been very good lately on that front; it ignores the issue of the under-funded retiree health benefit costs; and most importantly, it assumes that their revenue erosion moderates significantly going forward.

There are some very highly leveraged ways that you could improve USPS economics. But all require political will, so they're not likely to happen any time soon:

Valpak, part of Atlanta-based Cox Target Media, told regulators yesterday that the 2.57 percent rate increase set to come into effect on Jan. 27, 2013, will not be high enough to cover the costs of the Standard Mail Flats service. The company said in failing to meet its costs, USPS was breaking U.S. postal law, and putting its own financial health at risk—as well as requiring direct mail customers to effectively pay higher rates to protect the ailing catalogue industry.

“The enormous continuing $2B-plus losses from Standard Mail Flats contribute to jeopardizing the Postal Service’s survival,” Valpak warned the Postal Commission.