USPS Rate Increase Postponed – What Does an Increase Mean for High-Volume Mailers?

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Apr 2, 2015

The United States Postal Service (USPS) has announced that it will postpone the April 26th, 2015 implementation date for price increases.

Early last month, the Postal Regulatory Commission (PRC) remanded part of the Postal Service’s rate increase proposal, requiring further USPS review and explanation for Standard Mail, Periodicals, and Package Services. Among the concerns raised were unequal commercial and nonprofit discounts. On March 12th, USPS responded with revised rates and further explanations, hoping to stay on track with the April 26th implementation date. However, on March 18th the proposal was again remanded.

The proposed rate increases for First Class Mail, Special Services, and Competitive Products have already been approved, but rather than stagger implementation, the Postal Service Board of Governors announced last week that they would wait until rates for all products and services have been approved:

“After considering the complexity of the required programming changes in view of the remand of some of our proposed changes by the Postal Regulatory Committee, the specific complications that our customers might face; the potential cost to the supply chain as a whole of a staggered implementation, the Postal Service has decided to delay implementation until all of our proposed rates and classification changes can be implemented at one time.”

These delays have only further complicated an already uncertain situation for mailers. In addition to the price increases, the exigent surcharge of 4.3% enacted in 2014 to recapture revenue lost during the Great Recession is expected to be removed later this year after reaching its revenue limit of $2.8 billion. An appeal, however, could extend the surcharge. This means that postal rates could decrease overall later this year with the removal of the surcharge. The other scenario would be that rates could continue to impose the surcharge along with the new increased prices—a situation that is making rates unpredictable for business mailers, who now await a new implementation date.

Earlier this year, InfoTrends surveyed a group of high-volume mailers for our Document Outsourcing and Transactional Communications & Payments Advisory Services. We wanted to get the perspectives of outsourcing service providers on the rate increases and how they would affect businesses. What follows are some of the insights we gathered:

Are the presort rate increases a concern to you? The most common response was “yes,” but those who answered “no” had interesting points to make. One outsourcing service provider was unconcerned and confident in its own competitive advantage in attaining the five-digit presort discount. Another provider was quick to note that the USPS is not alone in raising its rates; delivery rates are also increasing for FedEx, UPS, and other shipping agencies.

Do you anticipate reduced per-client print/mail volume in a year when postage rates change? For one provider, there was no concern about volume because its business is primarily compliance messaging, which is going to be sent by mail regardless of the price. Among providers who expect per-client volume declines, the common theme was that the price increases will drive clients to increase their efforts to convert customers to electronic delivery.

Do you expect that postal price increases (in general) will drive more companies to outsource their print/mail operations to companies in better rate categories? Why or why not? We received a mixture of views on this question, and the responses were the most complex out of our three survey questions. There was only one emphatic “no,” with that service provider saying that most companies are savvy enough to send their mail out for presort. Another provider argued that companies will decrease mail volume, but still see fixed costs remain and per-unit costs rise, driving them to outsource.

InfoTrends will continue to follow this story as the rate increases go through approval and implementation. While the immediate story here is a delayed implementation date for USPS price increases, this is also about the year-to-year uncertainty regarding the costs of paper mail. It will be important for mailers to keep their clients informed of this rate increase delay and to plan accordingly.

Jason Cardona
Research Analyst

Transactional Communications & Payments

InfoTrends will soon be launching our 2015 Annual State of the Customer Communications Market Survey. For more information on how to participate in the survey design and see the results, contact Jennifer Skerrett at today!

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