Firms Upset Over Cost, Complexities of Postal Rate Hike

It’s not often that U.S. consumers bellyache because the government is charging too little for something. But the new 29-cent first-class postal rate that goes into effect at 12:01 a.m. Sunday has many Americans groaning.

“I’d much rather have it be 30 cents for my convenience,” said Ruby Hughes, an operator in the San Francisco office of Proxy Communications, a message service. “It’s such an odd number. I wouldn’t mind paying a penny more.”

For companies, on the other hand, those pennies mount up, especially with a recession raging, sales stagnating and the Persian Gulf War putting everyone on edge. And the hefty postal rate increases for magazines (up an average 22%) and third-class catalogues and other bulk mail (up an average 25%, with some boosts of as much as 40%) are causing companies to scramble to find alternative delivery services or to figure out how to qualify for a confusing array of discounts. Some businesses feel compelled to cut back on advertising through the mails.

“This is something not worth worrying about for the average household,” said Alan S. Blinder, a professor of economics at Princeton University. “(But) for businesses on the edge, it’s very bad news.”

Nationwide, businesses and individuals are attempting to absorb the sticker shock and complexity of the changes, announced Jan. 22 after 10 months of hearings by the independent Postal Rate Commission, which regulates postal rates and classifications. Postal Service seminars on the new rates in Washington and Los Angeles have been packed with hundreds of business mailers and others trying to sort out the 75 different prices in the rate structure.

So far, the changes--the first increases in three years--have upset just about everybody, including the Postal Service. It had sought a 30-cent rate for first-class letters and smaller boosts for third-class mailers than the commission ultimately recommended.

The quasi-governmental service’s board of governors approved the recommended rates only “under protest” because it fears that revenue will not cover costs.

Postmaster General Anthony M. Frank has even coined the term “penny foolish” for the first-class letter rate and the new 19-cent cost for postcards, which give new life to the penny at a time when many are advocating its demise. Under the Postal Service plan, a 30-cent first-class letter rate and 20-cent postcard rate would have enabled the service to keep the increase for third-class mail to 17%.

Frank fears that the steep increase for third-class mail could prompt cataloguers and other companies to hire other delivery services, thereby reducing business for the Postal Service and raising the possibility of further first-class increases.

“The possibility is that the cleanest, . . . densest third-class mail will be stripped away, and we’ll be left with the most expensive to deliver,” Frank said in a telephone interview Friday. “We could go into a downward spiral.”

At Suburbia Furniture in Daly City, south of San Francisco, owner John Haas said he has seen his advertising dollar shrink over the years because of postal rate increases.

“A few years ago, I used eight-page flyers,” Haas said. “Today, I’m down to a jumbo postcard.” In February and March, Haas plans to reduce his mailings by 20% because of an estimated 26% rate boost, even though he feels that stepped-up promotions would bring in much-needed customers.

Haas said he has testified before the Postal Rate Commission “in every rate case for the last several years.” This time, he said, the commissioners “seem to me they just don’t like third class. They don’t understand its importance.”

Ruth M. Owades, president of Calyx & Corolla in San Francisco, which sells freshly cut flowers through catalogues, said the increases will boost her mailing costs by $500,000 over the next 12 months, to $1.8 million.

The company, which sends out as many as 3 million catalogues six times a year, plans to scrutinize its mailing lists more closely, perhaps cut back on mailings and look for alternative delivery services. Owades said she also expects more orders to come in by phone or facsimile machines as customers balk at spending 29 cents to mail.

One company that isn’t complaining is Alternate Postal Delivery, based in Grand Rapids, Mich., which has been signing publishers and catalogue companies seeking to hold down delivery costs.

“Our goal is to be . . . 15% less (expensive) than the Postal Service,” said James Bernstein, director of customer relations for catalogues at the company’s Evanston, Ill., office. J. Crew and J. C. Penney are clients, and Lands’ End is looking at hiring the service, Bernstein said.

Another likely beneficiary will be Pitney Bowes, the big mailing equipment maker in Stamford, Conn.

“It’s a big opportunity for us,” said Tom Shimko, director of marketing for mailing products. Customers have been soliciting Pitney Bowes’ help in figuring out how best to qualify for Postal Service discounts by using four-number ZIP Code extensions and putting bar codes on envelopes for easier sorting.

The company also is launching two caller-paid hot lines that offer mailing tips. One will cost callers $5, to cover postage and handling for a wall chart summarizing the new rates and discount programs for mailers.

For those executives losing sleep over the increases, the Postal Service is even supplying a soporific free of charge: a new 96-page Postal Bulletin with the snappy title, “New Postal Rates and Fees Effective Feb. 3, 1991.”

NEW POSTAL RATES TAKING EFFECT SUNDAY New postal rates take effect Sunday . Here is a look at the effects: * FIRST-CLASS LETTERS. Postage for letters weighing one ounce or less increases to 29 cents from 25 cents.

* MORE WEIGHT. Each additional ounce will cost 23 cents. A two-ounce letter will cost 52 cents, a three-ounce item will be 75 cents.

* STAMPS. Because new stamps had to be printed before the rate was decided, the first group carries only the letter “F.” The F stamps can be used only for U.S. addresses, not for foreign postage. The first labeled 29-cent stamp is to come out in late February.

* DESERT STORM. F stamps can be used.

* POSTCARDS. Rates go to 19 cents.

* FOUR-CENT STAMPS. The Postal Service has produced “make-up rate” stamps with no design for four cents. They read: “This U.S. Stamp, along with 25 cents of additional U.S. postage, is equivalent to the ‘F’ stamp rate.”

* OLD STAMPS. “A” stamps are worth 15 cents; “B,” 18 cents; “C,” 20 cents; “D,” 22 cents; “E,” 25 cents.

* BOOKLETS. Booklets of 10 stamps will sell for $2.90; 20 stamps for $5.80.

* OVERSEAS RATES. The new rate for Canada is 40 cents per ounce; Mexico, 35 cents a half-ounce and 45 cents for an ounce; all other countries, 50 cents for a half-ounce and 95 cents for an ounce.

* PACKAGES. Parcel post rates will increase. Current fourth-class rates from $1.43 to $26.61 will increase to $1.74-$32.25. The cost of mailing a 7-pound gift will increase to $4.64 from $4.

* EXPRESS MAIL. Current rates of $7.75-$89.05, depending on weight, will increase to $8.35-$91.60.

* POSTAL BOXES. Current rates of $14-$170 will increase to $21.50-$202.50.

* SPECIAL HANDLING. Registered mail rates remain $4.40. Certified mail, which provides evidence of mailing and delivery, will rise to $1 from 85 cents. Return receipts will increase to $1 from 90 cents. Insurance rises as well.

* JUNK MAIL. Third-class advertising mail will also pay more, though the pricing formulas are complicated by distance, weight and number of pieces. The Postal Service estimates that a typical two-ounce advertisement will increase in cost to 17.9 cents from 16.7 cents, while the price of mailing an eight-ounce catalogue will rise to 36.3 cents from 27.1 cents.

* NONPROFIT GROUPS get a cheaper rate than advertisers but will pay more.

* ENVELOPES. The Postal Service plans in the near future to sell special envelopes for 27 cents with bar code markings for automated sorting. These would be reply envelopes supplied by businesses.