Slim-jims get squeezed

Jun 01, 2008 9:30 PM  By

Letter-size catalogs, aka “slim-jims,” have helped many a mailer get through tough times by reducing postage and paper costs. But a proposed rule adjustment to slim-jim requirements by the U.S. Postal Service threatens to wipe out significant savings.

Thanks to the huge rate hike in May 2007, which boosted postage on average 20% to 40% for many catalogers, letter-size books have indeed become more popular. The tall skinny trim size — roughly 6-1/8″ × 11-1/2″ and typically up to 1/4″ thick — is cheaper to mail than a full-size book, and the smaller trim size means less paper.

So what’s the problem with slim-jims? The Postal Service says that under the current requirements, they’re too fat. What’s more, the tabs required to seal the pages aren’t strong enough. These factors are causing slim-jims to jam the USPS’s automated processing equipment.

The Postal Service wants to change the size standards for slim-jims, cutting down thickness — and therefore page count — by nearly half. It also wants to bolster tabbing requirements, which could affect catalog open rates.

New proposed requirements would be detrimental, say slim-jim catalog mailers. Just ask Ed Weiss, general manager for DVD and video merchant Movies Unlimited. “If we have to reduce the size of our slim-jim book by 50%, the result would be devastating,” he says. If the USPS is eliminating books at its current size from the rate structure, “we will have to come up with something else, which I can assure you will mean decreased circulation and ultimately less money for the Postal Service.”

Movies Unlimited had used slim-jims for special promotions in the past, but after last year’s postal increase, Weiss says he had to move all of its mailings — with the exception of its annual big catalog — to this size early last year. Previous catalogs had page counts ranging from 128 pages to 160 pages, Weiss says. “Everything is now 80 pages,” he says.

While the slim-jims obviously dramatically cut down the number of offerings Movies Unlimited had in each mailing, the move also reduced the company’s overall costs per mailing by around 50%.

“As a result, we started mailing more — not twice as much, but every four weeks instead of six — to our regular customers,” Weiss says. “This has so far been beneficial to our sales, even though we are offering fewer items per book.”

Stiffer standards

According to 39 CFR Part 111, the proposed rule published in the Federal Register on March 14, the USPS says many slim-jims will jam letter automation equipment; plus the books get mangled during processing. To avoid these problems, slim-jims often are run on flat-sorting equipment, which processes without major problems, but it costs the USPS more. So the Postal Service says it’s developing new automation mail preparation standards for letter-size booklets and folded self-mailers. These standards will more accurately characterize which pieces can be run on its primary letter-sorting equipment, it says.

What’s more, the proposal says there has been an increase in untabbed booklets that are entered at machinable (non-automation) prices. “Many of these booklets cannot run on our primary letter-sorting equipment, even if tabbed,” the proposal says. “Our new mail preparation standards will better align the machinable and automation requirements and outline new tabbing requirements for efficient letter mail processing.”

The USPS tested two mailpiece thicknesses — 1/16″ and 1/8″ — and found that as long as the tabs remained in place and did not break, the 1/16″-thick pieces ran with jam and damage rates somewhat higher than the rates anticipated for similar enveloped letters. The 1/8″-thick pieces sustained unacceptable rates of jams and damage throughout the range of all characteristics tested.

But for slim-jim mailers that need every possible selling page, a 1/16″-thickness limit is too slim. Discount general merchandise cataloger Sierra Trading Post has made a considerable investment in slim-jim books.

“With the substantial postage increase, we switched two of our titles to the slim format purely for cost reasons,” says director of catalog operations David Giacomini. “Currently, out of our nine distinct titles, five of those are now slim format.”

Switching to slim-jim books hasn’t lowered annual postage costs, Giacomini adds, but “it’s helped reduce the impact of the substantial postage increase. So instead of seeing 30% increases, we are seeing increases closer to 5% as a result of our cost-saving measures.”

Even with the lower costs afforded by mailing the slim catalogs, Sierra Trading Post reduced its overall circulation. “If the rule change goes into effect, this would have a major impact on our overall mailing strategy and would certainly mean reducing circulation further.”

Sierra Trading Post’s circulation for this year will be nearly 60 million, Giacomini adds. “If the new rules are adopted, I would expect to reduce circulation by about 10%.” Reducing the width of books would have a major impact: “Our slim catalogs have very high product density as it stands,” he says. “Most of our slim mailings are at a maximum page count to qualify for automation rates as well.”

Any reduction in page or overall page count would result in lower sales and response rates. “We would then need to reduce circulation to marginal segments such as older buyers and prospects,” Giacomini says.

Send it in a letter

Giacomini at press time planned to submit formal comments to the USPS regarding the proposal. “We feel it is an obligation we have as a cataloger to voice our concern,” he says. He’s not alone.

Allen Abbott, executive vice president/chief operating officer of Paul Fredrick MenStyle, sent one such on behalf of the menswear merchant to the USPS. In outlining the importance of slim-jim books to his company, Abbott’s letter says the catalog format is “an ideal vehicle for Paul Fredrick’s season end clearance sale offerings.”

What’s more, the letter notes, “Our 48-page slim-jim catalog is manufactured in a very efficient manner, utilizing a single printing form on one stock (50 lb. #4 quality paper). This format allows us to present all of the sale goods from a given season in an extremely cost efficient manner, from both a manufacturing and mailing standpoint.”

Abbott says Paul Fredrick Menstyle will mail a total of 14 million catalogs this year, of which 2 million will be slim-jims. “Any requirement that would lead us to reduce page count in this vehicle would more than likely force us to adopt a different format at a higher cost, reducing the number of pieces that we would be able to mail at a profit,” the letter said.

The USPS also heard from gifts cataloger Miles Kimball. A letter from its vice president of printing services, Chuck Braun, says Miles Kimball will mail more than 123 million catalogs this year, of which 47 million will mail at the letter rate. “Any changes to the regulations regarding the make-up of letter-size pieces are obviously of great concern to us.”

A key threat is the proposal to reduce the maximum thickness of a letter-size booklet to 1/16″, “as nearly all our letter-size catalogs are 1/8″ thick. Reducing the number of pages by half is not an option that we can live with, given the breadth of our product offering required to maintain response rates needed for survival in our industry.”

Reducing paper thickness, Braun added, “is not an option for us either, since we are already printing on paper near the minimum thickness that can be run on a commercial printing press.”

If this proposal is adopted, Miles Kimball will have no choice but to mail these catalogs at the flat rate, adding $3.5 million to its annual postage outlay.

“This on top of a 20% postage increase in 2007 and another 2.9% in 2008 will be a huge blow to our profitability. We strongly urge you to reconsider this proposal and consider any means possible to accommodate a 1/8″-thick letter-size booklet on your letter sorting equipment.”

Keeping tabs

Braun’s letter also addressed the proposal to either add to the required number of tabs on a letter-size piece or to make the tab perforation stronger.

“While we appreciate the need to keep the piece together while moving through the sorting equipment, we need to balance that with our customer’s willingness to tear through a difficult-to-open tab. Again, we urge you to move cautiously on this proposal and require only the absolute minimum tab strength necessary.”

Tabs that seal a book closed are a detriment to the catalog open rate, says Lawrence Davis, vice president of marketing for Ross-Simons. In fact, the jewelry and gifts merchant has conducted studies that show tabbing cuts response by 20%. And those tests were performed with perforated plastic tabs, so a heavy-duty, nonperforated, USPS-certified tab would likely suppress open rates further.

“The USPS proposal for slim-jims basically eliminates catalogs from the letter-rate paradigm,” says Davis. The USPS plan to cut the thickness of slim-jims by one-third will be impossible to manage from a paper/manufacturing perspective, he notes. “It also decreases the page count and increases the postage burden on the remaining pages.”

Davis and Ross-Simons president/CEO Darrell Ross outlined their concerns regarding the proposal in a detailed letter mailed to the USPS in early April. They suggested the USPS move the saturation level for flats from 10 pieces to six. (See “Ross-Simons Takes USPS to Task” on page 14.)

Insult to injury

If the rules are implemented as proposed, it would lead to the elimination of the company’s entire circulation of 20 million letter-size catalogs in 2008.

To add insult to injury, Davis says, when the rate case was announced last May, “the USPS trumpeted the slim-jim letter mail as a way for catalogers to cut costs in light of the new, more onerous charges on flat mail.”

Indeed, says Hamilton Davison, executive director of The American Catalog Mailers Association, the catalog industry was told to use slim-jims as an alternative. “There are substantial redesign and marketing costs associated with a format change,” he says.

“Forget that catalogers did not have time to test properly: Catalogers were forced to consider alternatives including reducing a historical dependency on mail.”

In fact, Standard Mail flats fell 15.6% in March 2008 alone, marking three consecutive quarters of decline, which predates the recession, Davison says. Standard Mail flat volume is down more than 13% for the past six months. “This is just the beginning of a structural decline in circulation volumes unless something is done quickly.”

For the USPS’s part, spokesman David Partenheimer assures mailers that the slim-jim project is only a test at this time. The current size standards will remain in effect “until all testing can be completed, the data gained from the tests can be analyzed, and standards can be written that reflect the result of that analysis.”

A proposed rule would likely be published later this year, including time for mailers’ comments, and after that a final rule. “We always consider comments we get from mailers before we develop the final rule,” Partenheimer says.

After the USPS finishes drafting the new standards for booklets and folded self-mailers, it plans to extend those standards to all machinable letters. Any rule modifications would likely not take effect before 2009.

What will happen to the industry if this proposal goes through? “I think many catalogers will ultimately fold up, or just do Internet if they can survive,” says Movies Unlimited’s Weiss. “We’ll be around and mailing in some form, because I am a big believer in catalogs. Just how we will adjust remains to be seen.”

ROSS-SIMONS takes USPS to task

Ross-Simons is not happy about the U.S. Postal Service Proposal #39 CFR Part 111, targeting letter-size booklets and folded self-mailers. The jewelry and gifts merchant’s president/CEO Darrell Ross, and vice president of marketing Lawrence Davis, outlined their concerns in an April 7 letter to the manager of Mailing Standards for USPS.

According to the letter, in May 2007 when Ross-Simons faced a 34% increase in postage costs for flat mail, it had two choices: “Pull 20 million catalogs from circulation, thereby crippling our business,” or “adopt what the Postal Service extolled as a great compromise: the letter-size catalog, or ‘slim-jim.’”

After examining rates and sizes, and a costly redesign on three of four catalog titles, Ross-Simons officials contacted the USPS Pricing & Classification Service Center and told them they planned to shift their flats to letter-size mail. In October 2007, Ross-Simons published its first letter-size catalog, a slim-jim (6″ × 10.5″), followed by a digest (5.375″ × 8.375″) and a modified slim-jim (6.125″ × 9.375″).

As to the proposed changes to slim-jim catalog thickness and tabbing, the letter says: “The goal of any cataloger is to optimize his selling space at the lowest possible cost. In other words, more products for sale on more pages (and hence a thicker book) is optimal.” Given that the postage rate for letter mail is fixed per piece, mailers aim to optimize postal efficiencies by printing the maximum number of pages allowed under the weight limits.

If the new rules require that the maximum book size be cut in half from 1/8″ to 1/16″, “then we will have to cut our pages in half,” the letter says. “The Postal Service will have effectively doubled the postage cost on our pages circulated.”

What does Ross-Simons suggest the USPS do? Move the saturation level for flats from 10 pieces to six. This would give smaller firms (mailing 400,000 to 1 million pieces per drop) the same rates as larger catalogers, Davis says. “It would allow the industry to be creative and establish differentiation with trim sizes, paper quality, and book thickness.”

What’s more, the six-piece saturation threshold for ECR qualification is the same threshold that magazine mailers enjoy. The rule change “would afford catalogers some of the protection that the slim-jim pronouncements from 2007 were supposed to provide.” Additionally, the USPS would make more money on a per-piece basis, as it would add volumes at $.25 a piece as opposed to losing volumes for which it collects only $.22.

“This seems simple, fair and practical,” Davis says. “I am hopeful that the postal officials will see the wisdom and elegance of this very simple adjustment to the rules.
Jim Tierney

ACMA HEADING TO DC

If you’d like an audience with the top postal people, the American Catalog Mailers Association has organized a trip to Washington later this month. The National Catalog Advocacy & Strategy Forum will take place on June 26-27 and include meetings with the Postmaster General, the chairman of the Postal Regulatory Commission, and other U.S. Postal Service executives.

ACMA executive director Hamilton Davison is urging catalogers and their key suppliers to participate in the Forum. “Before last year, postal decision makers never heard from catalogers directly,” Davison says. “It is time to change this dynamic and work constructively to undo the carnage in the catalog industry today, and the similar impact in our nation’s biggest employer soon to follow.”

Participation will be $750 for ACMA members and $1,500 for nonmembers, with some added benefits. For more information, visit www.catalogmailers.org.
Jim Tierney