Publishers may find substantial cost savings by presorting magazines and putting them into the mail stream closer to their destination, according to a study from the Magazine Publishers of America.
That’s just one alternatives to current postal structures under consideration by the MPA with help from McKinsey & Co., a management consulting firm.
And with periodical rates projected to hit $600 million or more by 2004, mailers are looking for options, Rita Cohen, senior vice president, legislative and regulatory policy, said.
The study, which was conducted in late 2001, evaluated four alternative delivery possibilities. They are:
*a partnership with the U.S. Postal Service for private delivery of mail to the last ten miles before its final destination, at which time the USPS would take over
*a partnership with the USPS for private delivery of mail directly to the last mile
*a complete alternate delivery to the destination without using the USPS network
*pickup by subscribers at retail outlets such as Barnes & Noble
The study determined that as long as the USPS maintained its monopoly over mailboxes, a delivery system outside the postal service would not work.
But putting magazines into the mail stream closer to their destination is not as far-fetched as it might seem. While the largest amount of publications go into the mail stream in the originating post office (45%), publishers can and do drop-ship magazines into bulk mail centers, area distribution centers, or even sectional center facilities. Each of these carries increasing postage discounts, because mailers have to segment and format drops.
In February McKinsey made its recommendations to the MPA board, which formed a task force to explore the initiatives. The board is currently weighing a number of options, including cooperative strategies, and hopes to launch some trials this summer.
Next steps include evaluating the postal service’s interest in sharing the workload up until the last ten miles and to keep pushing for bigger worksharing incentives to private sectors. Some issues – such as union resistance due to a decrease in the USPS labor force if mailers do more of the work – can be overcome through typical attrition rates. Getting mailers to do more of the work might eliminate 15,000 jobs – but the USPS loses 40,000 annually through natural attrition.
As an interim step, magazine mailers should investigate whether they are taking advantage of all the discounts for which they are eligible. McKinsey estimates that only 30% of them are – and that 80% of them could be.
“This is the year we are going to get a partner to work with us on anything we can try,” Cohen said.
Cohen made her comments at “Postal/Distribution Strategies: What You Can Do in 2002,” a session at the Circulation Management Conference & Expo. The conference runs through Wednesday, May 22.
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