Understanding Postal: Beyond Rising Postal Rates

Prepare for key classification changes next year.

This is a column for those who understand that they’re in the direct mail business. Believe it or not, many catalog marketers refuse to acknowledge this fact, even though some 30 percent to 40 percent of their operating costs come from mail-related marketing and fulfillment expenses.

Those in the direct mail business know all too well that postal rate cases usually are harbingers of rising postal costs. They also know that by the time higher rates are put into effect, they must have a plan in place to accommodate the rate and operational changes every rate case brings.

As you hopefully know by now, the U.S. Postal Service filed another request for higher rates and mail classification changes before the Postal Rate Commission earlier this year. Following about 12 months of deliberations, the new rates and requirements likely will go into effect next spring.

Catalogers should take note of several aspects of the present rate case:

The Postal Service is changing its mail classification system to better reflect the cost-causing characteristics associated with mail shape (e.g., letters, flats, parcels). It intends to align postal prices with the kind of machinery on which the mail piece is eligible for processing. For sure, this will mean the cost and price of flat-size catalog mail will be significantly higher than for letter-size mail. In short, if you’re already preparing letter-size, tabbed, automatable catalogs, continue to do so if you can justify such a decision based on the market’s response to your product.

Unlike previous cases, the Postal Service will be offering automation-rate eligibility to one size flat only, i.e., those pieces that meet the requirements for processing on the Postal Service’s Automation Flat Sorting Machine 100 (AFSM 100). Under the USPS’ proposal, the existing Domestic Mail Manual specifications for AFSM 100-compatible flats (DMM 301.3.3) most likely will apply to such mail.

The USPS will eliminate all automation-related discounts for mail that exceeds the maximum dimensions of an AFSM 100-eligible piece, but falls within the bounds specified for mail processed on the Universal Flat Sorting Machine 1000 (UFSM 1000). In other words, those nice, flat-size catalogs that exceeded the AFSM 100 maximum permissible mail-piece thickness of three-quarters of an inch, but fell within the UFSM 1000 maximum thickness of 1.25 inches no longer will qualify for automation rates. All UFSM 1000-eligible mail pieces now will be considered nonautomatable mail.

In this case, the USPS is distinguishing flats eligibility according to two new criteria. The first is for mail that meets the maximum permissible dimensions for AFSM 100 mail processing but doesn’t carry a barcode. This category of mail will be known as nonautomation machinable flats.

Yet another category will exist for mail pieces that don’t conform to the dimensions eligible for AFSM 100 processing, and these will be known as Not Flat Machinable (NFM) Flats/Parcels. This proposed category most likely would include pieces that are rigid (e.g., prepared in boxes or other rigid containers) and pieces smaller than 5-inches-by-6-inches, or more than 12-inches-by-15-inches.

Further Distinctions

To make matters even more difficult to discern, the USPS is proposing to make a further distinction between mail that it would consider NFM flats (“hybrid flats”) and NFM parcels (“hybrid parcels”). The only reason for making such a distinction is to signal for flats and parcels at least one more evolution in classification that fully distinguishes the cost and processing differences inherent in flats and parcels; a decision, it says, that is being put off to another day simply to reduce “rate shock.”

What this means for catalogers is simple: Do whatever you can to reconfigure your catalog pieces to qualify for automation processing. If you decide not to do so, you had better have a very good business reason, because the price you’ll have to pay for this mail will be considerably higher than for
automatable flat-size mail.

What else should you look into? For sure, you should explore the additional savings from destination entry for your mail. Before this case is over, I have no doubt the discounts provided for mail that is transported by the mail to a near-destination mail processing facility will more than compensate the effort that drop-shipping will require.

Check with your printer on this one. In some instances, it may be possible to qualify catalog mail that ordinarily wouldn’t qualify for destination entry by co-mailing catalogs on pallets with other flat-size destination-entered mail. This may require additional planning on your part as far as the design, production and distribution of your catalog is concerned. Again, if you choose to forgo this option, be sure you have a well-substantiated market-based reason.

Finally, keep in mind that all rate cases are composed of “proposals” that may be subject to change by the time new rates are put into effect. Stay close to those who manage the production of your mail. Stay informed of the latest developments in the R2006 rate case, and open your mind to as many options as you can, even if you’ve never explored them before. It’ll certainly be worth your while.

Gene Del Polito is president of the Association for Postal Commerce, an industry group that represents the interests of companies that rely on the mail for their business. Contact: (703) 524-0096 or genedp@postcom.org.