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U.S. Postal Service rate changes will affect both printers
and their clients
By LaShell Stratton
 A worker at UPS Mail Innovations sorts flats at one of the conglomerate's 12 processing facilities in the United States. Experts at UPS Mail Innovations have studied the upcoming postage rate changes and offer alternatives to their clients. |
The U.S. Postal Rate Commission is now considering one of the most complex changes to the mail pricing system in history and it has some corporations that ship millions of letters, flats and parcels annually shaking in their boots. The proposed rate change, Rate Case R-2006-1, is slated to take effect in May. Though in December 2006 Congress passed the “Postal Accountability and Enhancement Act” which, once signed by President George W. Bush, will place a cap on postage rate increases by tying them to the Consumer Price Index, the new legislation will not affect the rate changes currently being considered by the commission. Only all rate increases that follow. Rate Case R-2006-1 is still expected to leave a ripple effect in the printing industry.
“The print industry will be affected,” insists David Marinkovich, USA senior vice president of sales, marketing and customer service at DHL Global Mail. “From print charges to design, to the density and thickness of catalogs, all that will have to change. They may have to minimize the materials.”
Some distributors and manufacturers are already mapping out game plans for how to deal with the rate changes and how to allay some of their clients’ fears.
“Marketers will continue to mail,” says Greg Marks, president of Intra-Media Solutions, Phoenix. Because of this, he doesn’t expect the postal rate change to have too much of an impact on his distributorship. “But for those customers who are worried about the changes, we suggest internet communications as an alternative,” he says.
“We’ll have to alert our clients. They are doing their budgets now so we plan to send out a newsletter in upcoming weeks to alert them about the change,” says Bill Llewellyn, owner of Universal Printing & Mailing Services Inc. in Chicago. “Our customers will see an increase. Now there will be additional charges for driving the mail farther, closer to its actual delivery point rather than dropping it off at the closest post office. There will also be the general postage increase. Some clients may not do as many mailings, but I think the majority of our clients will just absorb the cost.”
New Price ScaleThis chart illustrates the current prices of some mail pieces, the proposed prices under the new rate plan and what potential modifications companies can make that will lower postage costs.
Courtesy of the U.S. Postal Service, www.usps.com |
The Shape of Things
In addition to calling for a first-class stamp rate increase from 39 cents to 42 cents for consumers, Rate Case R-2006-1 also calls for a fundamental shift in postage pricing.
Instead of prices focusing on just the weight of mail pieces, as it does currently, the weight and shape will come into play. The plan also calls for pricing incentives for quality addressing of mail pieces and pieces shipped from locations closer to their destinations. But mail couriers are predicting that the “weight vs. weight and shape” shift will probably have the greatest impact of all the proposed changes. According to USPS, now a single-piece parcel weighing 6 ounces that once cost $1.59 to ship will cost $2.00. (See “New Price Scale” chart below.) The only way a corporation can save money is if it configures the parcel into a flat piece, which will still mean paying $1.62 in postage. For companies that ship thousands of marketing collateral pieces, booklets and promotional products a year, this 41 cent increase per parcel could have a huge influence on their bottom lines.
“Now you’re in a situation where you can potentially put someone out of business… Everyone who’s heard about it is concerned,” says Rich Elefante, director of marketing at UPS Mail Innovations, Alpharetta, Ga., which serves as an intermediary between its customers and USPS by processing first-class and priority mail of less than a pound. “So we are trying to educate our sales force in order to educate our customers.”
John Walsh, vice president of sales and marketing at UPS Mail Innovations says even the timing of the changes can affect company budgets. “We were told it would go into effect in July but now the Postal Service is saying May. When you change your rates and you’re a direct marketer, just a few months’ difference can have an impact on your budget. If you’re off by a month or two, that’s potentially $100,000 to $500,000 difference in postage.”
But the Postal Service insists that the postal rate changes are needed.
“The reason we are proposing new prices is because, like other businesses, the cost of doing business has gone up, especially costs related to fuel and health care,” says Dave Partenheimer, postal service spokesman. “But it is important to remember that by the time the new rates take effect in the spring, the cost of a first-class stamp will have increased by an average of just a penny a year during the last five years, less than many other consumer products and services.”
Partenheimer says the changes are meant to bring about more efficiency to the mailing system. “Letters are less costly to process and deliver than flats, and flats are less costly to process and deliver than parcels,” he says. “Within each shape category we also continue to pursue automation advances that will reduce the cost of handling those particular shapes.”
How It Will Affect Printers
The ways in which print providers will be affected by the rate change will vary.
“We know a lot of these guys have to bid on jobs ahead of time,” Elefante says. “The shipping is usually the bumbled offering. Sometimes, if they’re off, the cost to the customer can be two to three times higher than what they expected.”
Elefante insists that this is the reason why companies should either ship through intermediaries like UPS Mail Innovations or print providers should consult them for their services before the rate change. “I say let them focus on their strengths, which are usually the printing, processing, and kitting,” Elefante says. “Let them focus on their core competency. Let us handle the shipping.”
“Printers will have to determine with their customers how this will affect their piece,” Marinkovich says. “They may have to reduce the number of print runs. The customers may do fewer mass mailings and become more surgical in their approach, which will have an effect on the volume of print. The mailings will more likely be in response to mailing requests rather than mass mailings.”
But at least one distributor is expecting the rate changes to have a positive effect on his business.
“Our products have become front and center in the rate case,” says Marvin Makofsky, President of Conformer Expansion Products Inc., Great Neck, N.Y. Makofsky says the patented Conformer Expansion Envelope “allows for more materials to go into smaller envelopes. We can improve postage rates and improve envelope efficiency, and now we have USPS evaluating our product as potentially to be used by consumers in post offices.”
Highlights of the Proposed Postal Rate Changes
Courtesy of the U.S. Postal Service, www.usps.com |