Mailers can expect to take a hit in 2003 because of the Internet’s rise and increased labor costs. John Nolan, the United States Postal Service deputy postmaster general outlined likely arguments for the service’s next rate case at his speech during yesterday’s luncheon at the Direct Marketing Days in New York conference.
“The USPS’ key attribute–affordability–is at risk,” said Nolan. He cited the post office’s need to continue to improve service and bring innovations that meet needs as driving forces for rate increases, but also mentioned unforeseen gasoline expenditures and increased labor costs due to arbitration and higher-than-expected cost-of-living adjustments.
In all, these represented $900 million in additional expenditures without a counterbalancing revenue increase. With a booming economy, according to Nolan, first class mail revenue should be up between 3% and 4%, but the post office has seen an increase of only 1%.
Nolan said that rather than waiting for a cost study to make up the 2003 rate case, the USPS will attempt to determine what the rates should be, and then give its managers the mandate to “make it happen.” The post office is also exploring selling air rights to some of its facilities, moving other locations to less expensive areas and using the more desirable locations to generate revenue.
Nolan also touched on the USPS’s efforts to harness the Internet in order to increase efficiency and strengthen core products. As examples he cited electronic bill payment through USPS.com, and its Postal 1 project, a tool that will allow information exchanges between the USPS and customers, allowing mailers to file postal documents electronically and alert local hubs as to large mail campaign drops.
If the post office is moving into the online arena, it is to reclaim part of the revenue the Internet has take from it. Currently, according to Nolan, bill presentation and payment accounts for $17 billion of the post offices revenue–around 25%. “If it goes away, we are in trouble.” The USPS, he said, is “faced with a disruptive technology.” Mail volume will drop, and the post office will need to grow revenue from other sources to ensure low-cost universal service.
Nolan sounded defensive when discussing some of the areas, such as secure electronic delivery services, that he saw the post office exploring. The USPS, he said, has built trust with its customers, and there has been opposition to using it as a marketing tool due to its monopoly status.
There are two reactions to the post office’s move to the Internet, he said: “The USPS is totally inept, and the USPS will crush competition.”
“I say, Which one is it?”
Nolan hastened to assure the audience that “nothing will be as important as the core [snail mail] business. “While the Internet caused many direct mailers to cut back their mail rates around 1999’s holiday season, Nolan said that immediately afterward there was a jump in mailings. But, he cautioned, “we view this as a reprieve, not a pardon.”
Nolan lightened the moment by commenting that if all the awards presented recently to Jan Brandt, DMDNY’s direct marketer of the year, had been mailed to her, “there would be no volume problem.”
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