Catalogers Applaud PMG’s View on Exigent Rates
Most catalogers who attended the National Catalog Forum in Washington June 21-22 praised Postmaster General Patrick Donahoe after he told attendees he won’t push for an exigent rate increase for Standard Mail flats – the category affecting most catalogers.
Donahoe, who made his remarks at the fourth annual National Catalog Forum held by the American Catalog Mailers Association, earned high marks in the eyes of attendees. But catalogers remain cautiously optimistic. Here’s what some of the attendees said about Donahoe:
“I found PMG Donahoe to be refreshingly open and honest in his willingness to partner with his customers to operate his business in a more efficient manner,” says Chris Smith, vice president of ecommerce/catalog for Jockey International. “If he is successful in moving his agenda forward, it will not only be a win for our industry, but for all mailers, and a win for the U.S. Postal Service.”
Terri S. Alpert, CEO of Stony Creek Brands, which operates Uno Alla Volta and Cooking Enthusiast catalogs, has attended each of the past four National Catalog Forums.
“I’m thrilled because it means the USPS has learned something in these four years,” she says. “I wish I could say I’m relieved. I’m not.”
Why? “Ultimately, the PMG must answer to the Postal Regulatory Commission and the PRC still tells us they believe we aren’t paying our fair share,” Alpert adds. “This is very scary. This statement is based on broken accounting, a labeling as variable costs for what are truly fixed costs in this environment, and most importantly static analysis – analysis which denies the economic underpinning of our business model. We catalogers all know that the way to optimize is to maximize incremental contribution.”
The PRC’s Annual Compliance Determination for fiscal 2010 found that rates for Standard Mail flats were not in compliance with the 2006 Postal Accountability and Enhancement Act when it comes to “a fair and equitable apportionment of the cost of postal operations.”
Translation: The PRC feels catalog mail isn’t covering its costs, and it wants the U.S. Postal Service to devise a plan to resolve the discrepancy. From the data published by the USPS and PRC, the American Catalog Mailers Association estimates it would take a 22.3% increase to bring flats to full-cost coverage. But PRC Chairman Ruth Goldway told attendees that was never the intent of her panel.
Catalogers are questioning the costing methodology, claiming there isn’t much difference in processing a magazine from a catalog.
Although he can’t speak for the Postal Board of Governors, Donahoe said he won’t push for an exigent increase, and he knows such an increase would cripple an already dire situation with declining mail volume.
“PMG Donahoe is a breath of fresh air,” Alpert adds. “He clearly understands that the USPS of the next few decades is going to look dramatically different from that of today because first class mail, the most profitable revenue stream, is going to dwindle to almost nothing very soon. The PMG appears to understand the economics behind our business model sufficiently to realize that when our postage costs go up, volume goes down by a greater amount – leading to lower revenue for the USPS. Now if only we could get the regulator (The PRC) to understand this.”
The U.S. Court of Appeals for the District of Columbia Circuit is asking the PRC to re-examine a section of the statute that led to the panel’s rejection of the Postal Service’s exigent rate case price request.
Under the Postal Accountability and Enhancement Act of 2006 (PAEA), postal rate hikes are capped at inflation as measured by the Consumer Price Index (CPI). This would mean rate hikes would be capped at an estimated 0.6%. USPS was seeking an average price increase of 5.6% in the exigent rate case. (Standard Mail flats or catalog rates would have gone up 5.1% if the rate case passed.)
Neil Sexton, president of industrial supplies cataloger Northern Safety, was impressed by all of the USPS officials who spoke at the forum, but he can’t get past the PRC’s view of catalogs as a “losing proposition.”
“The very positive piece of the puzzle came in the form of a true shift in the USPS marketing to us catalogers,” Sexton says. “I’m truly impressed at the inroads that catalogers and the ACMA have made in a short time.”
Sexton believes the PRC needs to grasp the true costs of catalogs, the USPS must remain solvent, and the USPS is ready to work with catalogers if the first two points are addressed.
Jennifer Kwiatkowski, director of circulation and analytics for home decor merchant Plow & Hearth, was impressed with Donahoe’s “innovative, open and honest assessment” of the USPS’s current financial and organizational inefficiencies.
Donahoe’s acknowledgement that an exigent rate increase will only further deteriorate volume and hurt the USPS and catalogers was “refreshing and also common sense,” Kwiatkowski says. “Their (the USPS) increasing desire to partner with us gives us hope. I would have liked to have heard more concrete discussion from the USPS regarding a prospecting rate.”
Ryan Hennig, vice president of catalog marketing for gifts and housewares merchant Miles Kimball, says he’s relieved Donahoe won’t push for an exigent rate increase, but “that doesn’t completely calm my fears that it may happen.”
Hennig is concerned by Goldway’s comments and her “plan” to address cost coverage of Standard Mail flats.
“I think the USPS has a leader (Donahoe) who gets it,’ Hennig says. “Now the only question is if the regulators and legislators will allow him to make the necessary changes.”
Alpert has been active supporting the ACMA since its formation in 2007.
“At my first ACMA conference four years ago, I had the hardest time getting my arms around who the various players were,” she says. “I now find that when I educate newcomers to our meeting they are as baffled as I am to learn that there is USPS management, there’s the board of governors and then there is the Postal Regulatory Commission. To most of us who are focused on running businesses, the idea that there is one government bureaucracy in Washington whose sole purpose is to tell another government bureaucracy what it can and can’t do is a concept a lot of us have a hard time getting our arms around. We are used to moving quickly – especially when the survival of our companies, our supply chain, the jobs we create, and the customers we serve are at stake.”
Alpert appreciates the progress that has been made, but is skeptical about the governmental chain of command.
“I remain very worried that there may be so much institutional inertia and politics, that any real change may be too little too late,” she adds.
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Related Topics: Postal, Operations & Fulfillment, Catalog, Multichannel Marketing, General |
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