Catalogers React to Rate Hike News

Catalog mailers tend to view any postal rate hike with fear and loathing. But now that rate increases are capped to the CPI (Consumer Price Index), or rate of inflation, the May postage hike was greeted with mostly sighs of relief—and even some cheers.

The U.S. Postal Service announced Feb. 11 that price increases for Standard Mail Flats – the category affecting most catalogers – would stay below the CPI. As described by USPS spokesman David Partenheimer, the increase for Standard Mail Flats as a whole is about 1.67%, But for the non-carrier route flats — the category that experienced the largest increase last year – the hike is less than 1% (0.86%).

For Hamilton Davison, executive director of the American Catalog Mailers Association (ACMA), which formed less than a year ago, the news about the increase was music to his ears. “It’s a terrific result,” he says. “It’s an important first step in what I hope is a significant series of improvements to the rate structure and totality of how mail is managed.”

The USPS clearly needs to grow its volume and cover its structural decline in other mail classes, Davison says. “We represent a great opportunity to do that. The USPS has shown a willingness to meet with us. This shows that the USPS is clearly reaching out to the catalog industry through the ACMA.”

Chris Bradley, president of Portland, ME-based bedding merchant Cuddledown, praised the work of the ACMA. “I think that it is clear that [the ACMA] has had a positive impact on postage rates,” he notes. “The USPS has obviously listened to what the catalogers have had to say, and I am thankful that they have recognized how sensitive our business model is to rate increases.”

The new rates for catalogers reflect a few things that have happened since the big rate increase of 2007, Bradley says. “One thing is the amount
of work that catalogers have done in the past year to educate the postal community on how rate-sensitive catalog mailing volumes really are, as well as the value to consumers and the economy of a robust catalog industry.”

The other factor is the recent decrease in catalog mail volume, which has fallen 13% below the level of this time last year. “The new rates are certainly a little lower than the CPI average, and that is a good thing, but our industry is still trying to cope with both last year’s massive increase and the current weak economy,” Bradley says. “I think we will continue to see decreases in mail volume.”

Simon Nynens, CEO of Shrewsbury, NJ-based software merchant Wayside Technology, agrees. “More and more promotional items are sent via e-mail,” he says. “Catalog production is down because of the effectiveness of this media as compared to other tools, such as paid advertising, e-mail, outbound calling campaigns, etc.” The increased postal rate is just one additional layer that will push more and more of mailers toward electronic delivery of promotions, Nynens says.

Other catalogers, such as Michael Muoio, CEO of Virginia Beach, VA-based Lillian Vernon, are more pessimistic about the fate of the catalog business. Lillian Vernon is still reeling from last year’s exorbitant rate hike, which increased its postage bill 20% and in part forced the mailer to lay off about 25% of its staff in December.

“For those not going out of business, it will be relief,” Muoio says about the lower rate hike, “but for many, I assume, it may be too late.”