Postal Rate Hike a Boon to Private Mail Carriers

Although the latest proposed postal rate hike has drawn the ire of consumers and businesses alike, private mail carriers are not complaining. In fact, they say, the increases will boost their business at the expense of the U.S. Postal Service.

“The momentum just increases,” said Howard Rosen, president of Publishers Express, which delivers mostly magazines in the Atlanta area. “More people will jump on the bandwagon.”

The nation’s more than 60 private postal companies deliver 3 billion to 4 billion pieces of mail a year, mostly third-class advertising circulars--commonly known as junk mail--and periodicals. Firms such as Alternative Postal Delivery Inc. of Grand Rapids, Mich., have teamed up with newspaper companies--including Times Mirror Co., which publishes The Times--to deliver magazines and other materials nationwide. Numerous media companies are testing their own delivery outfit--Publishers Express--in response to previous postal rate hikes.

The major advantage of the private carriers is the ability guarantee the delivery of materials to homes on a certain day or on Sunday, neither of which the Postal Service can do.

But hikes of up to 25% recommended by the Postal Rate Commission last week for advertising circulars, periodicals and catalogues will raise prices up to or slightly higher than those currently charged by private mail carriers.

“I think it’s going to give them the biggest shot in the arm they ever got,” said Gene Del Polito, executive director of the Third-Class Mail Assn., a mailers’ trade group that expects to be hard hit by rate increases.

The proposed increase “has created the environment for private delivery to thrive,” said Stan Henry, chairman of Alternative Postal Delivery, which distributes more than 3 million magazines a month in 16 cities. After the Postal Service adopts the increases, Henry estimates that the private industry rates in general will be 5% to 10% lower. Some mailers, however, say they may take advantage of the Postal Service increase to raise their own rates.

Even Postal Service officials concede that the higher rates might drive some of their customers to private carriers. “There is not a doubt that we will see an increased interest in developing alternative delivery systems,” said Dick Strasser, senior assistant postmaster general in charge of marketing and customer services.

But Strasser said the alternative carriers cover only limited areas. And despite the growth of some private carriers and previous price hikes, the Postal Service’s share of second- and third-class mail remains in the high 90% range, he said. Companies such as Publishers Express have been created to “show the Postal Service that there are some alternatives even though there is isn’t really that much of an alternative yet,” said Ken Bradstreet, president of the Assn. of Private Postal Systems.

The Postal Service--which retains the sole right to deliver first-class mail--also has another major advantage over its private counterparts: It is the only agency that legally has access to mail boxes.

“Everybody looks at their mail,” said David Stigler, senior vice president for legal and public affairs at Advo-Systems, which sends out 15 billion ads a year through the U.S mail. The private carriers’ inability to enter America’s mail boxes is a “distinct disadvantage.”

Such large-scale mailers as Advo also can take advantage of discounts under the proposed rate increases that could ease some of the pain. As a result, the main attraction of alternative postal companies will remain the ability to “guarantee the delivery day the client wants,” said Robert A. Ling, chief operations officer at California Independent Postal Systems Inc., which distributes materials to 2 million households a week in the Los Angeles area.

Ling said that the last postal rate hike produced a “slight increase” in business and that he might pick more business from Sears and other major retailers. The firm already distributes ads for Kmart, Pep Boys and Thrifty Drugs. There have been “some inquiries” but no new business yet.

“I’m not sure we will ever be able deliver to 100%” of the nation, said Rosen at Publishers Express, which delivers 160,000 pieces of mail in five Atlanta area ZIP codes. Still, he added, “I’m sure we will be able to establish a strong foothold over the next couple of years.”

Third-Class Mail Number of pieces of third-class mail (advertising, catalogues) by fiscal year. billions of piecs 1986: 55.05 1987: 59.73 1988: 63.25 1989: 62.78 1990: 63.72 Source: U.S. Postal Service Second-Class Mail (Southland Edition) Number of pieces of second-class mail (periodicals) by fiscal year. billions of pieces ‘86: 10.59 ‘87: 10.32 ‘88: 10.48 ‘89: 10.52 ‘90: 10.68 Source: U.S. Postal Service