Catalogers been slammed with high postage increases—namely the massive rate hike of 2007—and many have cut circulation as a result. Is there any way to stop this vicious cycle?
Yes, according to Larry Davis, the vice president of marketing for jewelry and gifts merchant Ross-Simons. Davis has a simple proposal that he says would “save the catalog industry” and solve the issue with letter-size or slim-jim catalogs. (Several mailers have moved to slim-jims to lower postage, but the catalogs are under scrutiny by the U.S. Postal Service because they jam sorting machines.)
“The level of enhanced carrier route penetration (ECR) on a flat mailing represents the most potential for a catalog mailer to increase circulation,” Davis says in a Jan. 26, 2009 letter to the manager of mailing standards at the U.S. Postal Service. The letter is in response to the federal register notice for letter-size booklets and folded self-mailers [#39 CFR part 111].
The Federal Register Notice regarding letter-size catalogs was published Dec. 29, 2008; comments will be taken through Jan. 28. The proposed revisions include the use of larger tabs with no perforations, and changes to catalog paper weight and dimensions.
“We propose a reduction in flat ECR minimums from 10 pieces to six pieces. This rule change would allow Ross-Simons to redirect millions of catalogs out of the letter class and back into flats. The Post Office will enjoy greater revenue on a per-piece basis. In addition, catalogers will actually increase their mail volumes.”
Davis made the same suggestion in a letter last April. “As previously stated, and as I wrote at length in my April comments, [Cranston, RI-based] Ross-Simons has become a letter mailer out of necessity, not by choice,” the Jan. 26 letter says. “We feel that many of our peers in the catalog industry are in a similar position. We would like to propose one simple change to the rules that apply to flats which would allow many of us to return to this class of mail.”
What’s more, Davis writes: “We predict that the millions of letter-size catalogs that are currently jamming the Delivery Barcode Sorter (DBCS) will be redirected back to the proper class of mail by other smart catalogers if they could mail at the reasonable rates already in the flat rate structures.
Ross-Simons would “embrace the opportunity to move our catalogs out of letter mail and into flats, as would many of our business partners,” David noted. “The Postal Service will get more revenue per piece at the ECR flat rate that it currently receives for letter-size catalogs.”
According to the Domestic Mail Manual (DMM Periodicals (707) Section 12.3) the ECR minimum for periodicals is six pieces. Catalogs should receive the same benefit as magazines, as the incremental sortation costs between the periodicals and catalogs are the same, the letter says.
Davis says the traying of slim-jims is “costly and cumbersome. The receiving personnel at postal facilities around the country will enjoy much greater efficiency by handling and transporting pallets of mail rather than trays.”
Implementing 39 CFR Part 111, Davis says, “will effectively increase our flat rate mailing costs by the full 40% from the rate case effective May 2007. I doubt the commissioners envisioned impact of this magnitude. The 2007 case has been devastating to our business and the colleagues I speak with. Eliminating the slim-jim will only compound the impact on our business and mail volumes.”
In fact, Davis’ letter continues, “the PRC specifically held out the slim-jim to be a “rate modifier.” With the effective elimination of the slim-jim with 39 CFR Part 111, catalogers like Ross-Simons can only decrease their mail volumes further. I think it is prudent to study the effects on volume as well as efficiencies that this rule change will affect.”
Ross-Simons mailed more than 40 million catalogs in 2008. The company has forecast 20 million pieces for 2009. “Our reduction in flat mailings is due to the May 2007 rate change that increased postage rates for flats by 34%,” Davis says in the letter.
“The economics are simple: we can’t break even on the 20 million books that we eliminated because the cost of flat postage is too high. We have tried to stem our reduction in volumes by adopting the letter-sized booklet rates, but the proposed rule will eliminate the slim-jim as a viable mail piece – thereby accelerating our mail reductions.”
What’s more, Davis says: “The Postal Service must remember that the only reason catalog mailers adopted slim-jims is because catalog rates were made unprofitable by the rate case effective 2007. Slim-jims were presented by PRC (Postal Regulatory Commission) Chairman Blair as a way for catalogers to mitigate the rate increase.”
If slim-jims are effectively eliminated, which Davis says is the net effect of this rule change, “then the benefits of driving efficient mail piece design will also be eliminated.”
When reached for additional comment, Davis summarizes: “If the Post Office goes ahead and increases catalog postage and eliminates the slim-jim mailer in 2009, they’ll find that they have killed an entire industry. They’ll get their per piece rate up to 40 cents, but there won’t be anyone mailing catalogs.”