POSTAL: USPS May File Rate Case

Catalogers could find themselves paying 7%-8% more in postage by the end of next year. Rumors have been trickling out of U.S. Postal Service headquarters in recent weeks that the agency will file for a rate case as early as this November. If that happens, rates could be implemented before holiday 2000.

According to Gene Del Polito, president of the Advertising Mail Marketing Association, the Postal Service will seek a 3% (1 cent) increase in the cost of a first class stamp, but a considerably higher increase for lightweight standard A flats, which include most catalogs. The USPS will seek a sizable catalog rate hike because it has “not been able to come in with the savings for flats automation,” Del Polito says.

But USPS spokesman Norm Scherstrom says that the agency has yet to announce anything with regard to a rate increase. “When we filed for the last increase [implemented in January 1999], it was our goal to stretch it out for two years.” But even if the USPS sticks to that plan, “we would have to file at least 10 months before 2001,” Scherstrom says. It generally takes at least 10 months from the time the USPS proposes a new rate package to the Postal Rate Commission, which in turn makes a recommendation to the USPS Board of Governors, until the new rates can take effect.

“Right now, we’re in a pretty intense budgeting process in which we’re trying to squeeze every cent out of the organization that’s not necessary for the future,” Scherstrom says. “So we haven’t made any formal announcement on a rate case yet.”

If the USPS seeks a rate hike of substantially more than 3% for standard A flats, “our argument is going to be that catalogers shouldn’t have to take a 7%-8% increase when inflation has been absolutely minimal,” Del Polito says. “Our argument to the USPS will be, if you have internal problems with automation savings, that’s your problem; you fix it.”

Williams-Sonoma sells coffee pots and mugs, while Starbucks Corp. sells coffee. So the rumor that Starbucks had bid to take over the home goods cataloger/retailer wasn’t so outlandish. In fact, shares of Williams-Sonoma jumped 17% on June 25 after newspapers reported tthat Williams-Sonoma had rejected the bid. But when questioned by Catalog Age, a Williams-Sonoma spokesperson said the company was not up for sale; a Starbucks spokesperson would not comment at all.

Buying the San Francisco-based Williams-Sonoma, which owns Pottery Barn and Hold Everything as well as the namesake catalog, would have made a certain amount of sense for Starbucks, says Kevin Silverman, a director at Chicago investment banking firm ABN AMRO. “Starbucks sells a single product, so there’s a great risk to sustain the growth rate it has had,” he says. But because the product lines are so different, “the normal types of synergies you get in an acquisition don’t appear to be there.”

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