In a letter to USPS Chief Operating Officer Pat Donohoe, BMG Columbia House VP Clifton B. Knight Jr. says that the proposed new Postal rates and regulations “will make it impossible for us to remain in the business of selling music and video products by mail”. Knight asserts that his company will face increases of “62% to 115%” in its product shipments. And if the company is “constrained to stop using the mail for product shipment”, it will “inevitably reduce, if not entirely eliminate” its “use of mail for marketing and promotional purposes”.

Knight says the problem isn’t just the rates- it’s the fact that the USPS is reclassifying his company’s product from flats to parcels, even though Knight claims BMG has gone to “considerable expense” to make sure that their CD and DVD shipments meet the requirements for automated flats.

Letter from Clifton B. Knight Jr to DPMG Pat Donohoe

The proceedings in the rate case are in the discovery phase at the moment. Part of the discovery process is the submission of interrogatories, or questions by participants. Most interrogatories, naturally, are submitted by intervenors to the Postal Service. But there are also quite a few questions being asked of other intervenors. Many of these are variations on “Where did you come up with those ridiculous numbers in the testimony you submitted?”

And sometimes interrogatories seem to serve no purpose but to make a point- here’s one, submitted to APWU witness Kathryn L. Kobe by the Major Mailers Association. Kobe had testified that “it seems highly unlikely that the mail that is converting to presort mail is equivalent to the average collection mail that is coming from individual households, nonprofit organizations, and small businesses”. The MMA posed the following questions:

Please assume that you are a dutiful niece who for years sent monthly letters to your Aunt Minnie. Assume further that all these letters exhibited the cost attributes similar to an “average” First-Class single piece letter. Now, in 2005 you and your Aunt Minnie discovered the Internet and you substituted your 12 monthly letters with 12 monthly emails. Please confirm that, as far as the Postal Service is concerned, those letters are lost to the system and First-Class Single Piece has lost 12 “average” Single Piece letters. If you cannot confirm, please explain.

Please assume that you also enjoy calling your Aunt Minnie as well, and in 2005 you decided to sign up for a cell phone. The cell phone company sent you 12 monthly bills in 2005, all of which qualified as Automation letters. Please confirm that, as far as the Postal Service is concerned, those letters are new to the system and First-Class Automation has gained 12 pieces that are similar to an “average” Automation letter. If you cannot confirm, please explain.

Please confirm that, as far as the Postal Service is concerned, the 12 “average” Single Piece letters lost and the 12 “average” Automation letters gained represent a “shift” of letters from First-Class Single Piece to Presorted. If you cannot confirm, please explain.

Here’s one argument for postal reform- streamlining the rate setting process might avoid giving people the impression that stamp prices go up every couple of months. This week’s BOG meeting, which set the implementation date for the rate increase being considered by the PRC produced headlines like this: ”Postal Service plans to raise rates“, as if this was yet another increase. Once the PRC makes a decision, there will be more headlines, followed by still more when the BOG accepts the decision, followed by even more when the rates actually go into effect.

Our competitors raise their rates at least once a year, in January, and slap on fuel surcharges and other extra fees whenever they see fit, with barely a peep from the press- what’s wrong with this picture?

Chris Lien suggests a metaphor for the contentious discussion on postal worksharing:

“Do we purchase the bicycle fully assembled and ready to ride off the show floor, or do we accept a discount on the price of the bicycle and assemble it ourselves?”

Some Assembly Optional

The upcoming changes in rates present challenges for mailers, but also opportunities- one obvious response to shape-based rates will be changes to the way mailers package their product- see the press release below for one company’s strategy suggestions:

Proposed Postage-Rate Increase Pushes Mailing Efficiency

Creative packaging solutions offer significant savings
The U.S. Postal Service recently filed to raise postal rates in spring 2007. The proposed rates, driven by rising operational costs, follow a more complex pricing structure than the flat 5.4% increase implemented last January. For the first time, the rate structure will rely on shape, as well as weight. The proposed rates include price incentives to promote mailing efficiency.

Under the new system, flats and parcels face higher increases because of their higher handling costs. Now, for example, consumers can mail a three-ounce letter, flat or parcel for $0.87. The shape-based rates will lower mailing costs for the same three-ounce letter to $0.82. However, postage rates for the three-ounce flat will increase to $1.02, and the rate for the three-ounce parcel will jump 61% to $1.40.

“The proposed pricing structure encourages use of flat and letter mailings whenever possible to take advantage of automated processing,” says Marvin Makofsky, president of Conformer® Expansion Products, a Long Island-based company that maximizes mailing efficiency with its patented line of expanding envelopes. “Organizations that rely heavily on mass mailings can save thousands of dollars by converting flat mailings to letter mailings and parcel mailings to flat mailings.”

DVDs, for instance, typically ship in padded mailers as parcels. Innovative products like the Conformer Expansion Envelope enable the post office to process DVDs as flats. For companies that mail these items in quantity, the savings add up quickly: $10,000 on a mailing of 50,000.

In some cases, organizations can reap huge savings by literally thinking out of the box. For example, a national bank that mails personal checkbooks to 500,000 clients per month can cut annual postage costs by $2.3 million, simply by switching to expandable envelopes from traditional check boxes.

“Conformer Expansion Products (CEP) remains committed to helping our clients overcome the challenge of rising postage rates by providing creative, cost-effective mailing options,” says Bob Makofsky, General Manager of CEP.

Conformer Expansion Products offers creative marketing solutions—including envelopes, portfolios and presentation folders—that feature the company’s award-winning, patented designs. These multifunctional products use revolutionary expansion technology and are compatible with industry-standard mailing systems.

CONTACT:
Bob Makofsky
Conformer Expansion Products, Inc.
516-504-6300 – Ext. 307
bmakofsky@conformerinc.com 
 

Send press releases to pr@postalnews.com

When I saw the headline, “USPS uses child’s ploy to ask for more and more”, I naturally assumed it was another Sam Ryan hatchet job. But I was mistaken- the editorial in the Marshfield, MO Mail was actually written by the publisher, Dave Berry. (You can tell he’s the publisher, and not the editor, by his style: “But nothing can make me like anything about the USPS asking for a 30 percent rate increase while counting on me to feel as if I’ve won if they eventually get half or even only a third of what they requested.” Can someone diagram that sentence?)

Dave’s problem with the USPS is twofold- he doesn’t like the new rates, and he doesn’t like the idea that the USPS wants to charge more for items that need to be sorted by hand- like, well, newspapers.

Dave specifically finds fault with the increase in rates for “In-County” periodicals, which he says will go up as much as thirty percent under the proposed rates. What Dave doesn’t mention is exactly what the current price is. If you take a look at the most recent USPS RPW report, you’ll find that so far this year the US Postal Service has handled 373 million pieces of In-County Periodical mail. For the same period, the USPS has taken in 34.8 million dollars in revenue for that mail. Do the math- the average postage on an In County paper is 9.3 cents! A thirty percent increase would boost that to a positively astronomical twelve cents!!

Not only that, but Dave contends that the new rate structure would “force our local papers to leave the local post office to be sorted elsewhere before coming back to the local post office for delivery. Gone would be same-day local delivery.”

Can you believe that? Not only will it cost twelve cents, but it might not be delivered the same day?

According to Dave, this is crazy, because he is positive the USPS is making a profit delivering his papers for nine cents apiece. Now at this point, you would think that Dave would just take his business elsewhere. After all, if it’s so obviously profitable to distribute newspapers for nine cents each, there must be tons of folks clamoring to get into the business. But no- Dave seems slavishly loyal to the good old post office. He says that “It’s going to cost our industry a lot of money to prove to postal officials that they are making a profit on the business we do with them”.

Hunh? If it’s obvious, it shouldn’t take much cash to prove it, right?

Unless of course, “proving it” means greasing enough lobbyist’s palms to get continued subsidies for in county papers written into postal reform legislation. But Dave couldn’t possibly mean that, could he?

Ozarks Newsstand – USPS uses child’s ploy to ask for more and more

(note- at the registration prompt use login:bugmenot password:bugmenot)

An article on the Entrepreneur Magazine web site explains how one e-Bay seller is dealing with the USPS rate increase. Unfortunately, she gets the rationale for the increase wrong. “the main [reason] the extra revenue is needed [is] to fulfill a federal law that requires the USPS to place $1.3 billion in an escrow account to cover civil service retirement benefits. ”

Actually, the escrow payment is the only reason for the increase. And the amount is $3.1 billion, not 1.3. And it isn’t to “cover civil service retirement benefits”- the only real reason for the escrow account at the moment is to provide a few extra bucks to offset the Bush budget defecit.

But there are a couple of interesting comments made by the author:

• “One very smart way for a seller to turn insurance from a high expense into a profit center is to consider using private package insurance. I’ve used the services of a company called U-Pic.com for several years and have saved considerably on my insurance. My customers get optional insurance and pay the standard USPS rates. I pay U-Pic their standard rate, which is a 60-percent savings to me over the USPS rates. I actually profit while insuring my packages!”
• “Another thing to consider when using Priority Mail is the availability of free boxes–delivered direct to your door by the post office. This doesn’t seem like much, but you can save up to 65 cents per box when you buy in bulk.”
• “My first knee-jerk reaction was thinking I would switch all my shipping over to UPS or FedEx Ground, but then found out that they’ve had rate increases as well.”

That last comment does make me wonder how much of an eBay expert the author is, if she doesn’t realize that UPS and FedEx raise their prices every year, but maybe it’s just that she’s always used the PO?

Ouch! The Postal Rates Went Up!