Postal rate hike may not end losses
When most postal rates rise on Monday -- among other things, mailing a first-class domestic letter will cost 2 cents more -- Washington will be depending on businesses like PouchSmart Inc. of Santa Monica, which still considers the post office to be the best option for delivering its products.
PouchSmart designs flexible pouch packaging with a resealable spout, such as a single-serve juice container. Its products can also be used in other applications, such as a squeezable applesauce pouch.
Because the company’s president, Dan Pritikin, thinks nothing sells his products like getting samples into the hands of potential customers, the U.S. Postal Service will remain his first choice in spite of rate increases.
The Postal Service is still so much less expensive than alternatives such as United Parcel Service Inc. and FedEx Corp., “that the savings are too compelling to ignore, especially for a small business in an economy like this,” Pritikin said.
But the Postal Service’s problem is that there just aren’t enough businesses out there like Pritikin’s. Some business customers have simply ceased to exist. Others have greatly reduced their expenses, including what they spend on regular and express mail.
“The economic recession has been tough on the mailing industry, and we have seen an unprecedented decline in mail volumes and revenue that continued to accelerate during the second quarter,” Postmaster General John E. Potter said Wednesday, when the Postal Service released its fiscal second-quarter financial results.
These showed that its mail volume in the quarter ended March 31 totaled 43.8 billion pieces, down 7.5 billion pieces, or 14.7%, compared with a year earlier. The Postal Service reported a second-quarter loss of $1.9 billion. The loss brings the total loss for the fiscal year -- which began Oct. 1 -- to $2.3 billion.
On Monday, the Postal Service is increasing the price of a first-class stamp to 44 cents from 42 cents. The cost of the first ounce for a large envelope will rise to 88 cents from 83 cents and the first ounce of a parcel will be $1.22 instead of $1.17. When they announced the increases in February, postal officials estimated that the increase would cost the average household $3 a year. But even with the increase, officials say, the Postal Service may have a $1.5-billion shortfall by the end of the fiscal year.
Although there are some businesses like Pritikin’s that will remain loyal Postal Service customers, there are others such as LITCO Marketing whose clients are clamoring for cheaper direct-mail options. LITCO is a graphic design and sales promotion company in Santa Monica that offers a variety of direct-mail services.
“When you are talking about 10,000 pieces of mail, the costs of a rate increase tends to add up,” President Larry Turkheimer said.
As Postal Service rates go up, LITCO Marketing’s customers increasingly will turn to other options, such as the Internet, Turkheimer said.
“They might use an e-mail blast to customers instead of mailing printed materials,” he said, even though his clients might reach fewer people.
“You have to depend on all of the homes having an e-mail account that is regularly checked,” Turkheimer said. “There will be a cost savings, but the impact won’t be as great.”
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