What's one change the federal government should implement quickly to increase revenue and also end a needless subsidy? Increase mail rates for business. Investors know it's the fall season - a time when students return to school and Americans get back to work. But it's also catalogue season – catalogues that consumers often have a hard time convincing companies to remove them from their lists, despite not having considered a purchase from them in eons.
And the reason the catalogues keep coming is obvious enough: commercial U.S. Postal Service mail rates are low: that 44-cent U.S. postage stamp you buy for a private, first-class letter subsidizes commercial mail delivery, which pays a dramatically lower rate on a per once basis.
Catalogue clutter
One by-product of the above? Catalogue mania. Although selected companies are no-doubt cutting back mailings as they trim marketing budgets during the recession, the generations-old trend is that catalogues seem to be glued to one's persona. Buy a gift for a significant female other from Lord & Taylor or Bloomingdale's and you're on their catalogue list for life.
Other stores mail you specialized catalogues that have zeroed-in on your interests, following purchases. For example: a catalogue featuring only men's clothes from an upscale department store, and one on a golf club sale at a sporting goods outlet.
Economic Analysis: A higher rate for commercial mail would have three benefits: 1) it would help the U.S. Postal Service become more self-sufficient, 2) it would really cut-down on unnecessary mailings, and 3) it would save many trees.
Finally, the intent of the above is not to stifle commerce, but rather to move businesses away from the taxpayer-costly, flood-the-market-with-catalogues philosophy because they're cheap, and toward a critical evaluation of who their most likely customers are, based on a higher catalogue mailing cost.
Closing Bell: When We All Love the PIIGS (NBG, SQNM, PG, ERTS, KO)
Serious Money: Cheapest Stocks List Shrinks from 26 to 21
Chasing Value: Hasbro Earnings Makes My Point
Reader Comments (Page 1 of 1)
10-12-2009 @ 5:52PM
Randy said...
"that 44-cent U.S. postage stamp you buy for a private, first-class letter subsidizes commercial mail delivery, which pays a dramatically lower rate on a per once basis. "
Very wrong. Each class of mail is required, by Federal Law, to pay for itself. Catalogs and other types of bulk mailings pay low rates because they are presented to the USPS already sorted to individual ZIP Codes and many are already sorted into the Carrier Route Sequence. If USPS does not need to perform this task, the mailer does not pay for it.
10-12-2009 @ 11:06PM
william lindblad said...
Joe, you are trying from Cramers job.
BAD IDEA
10-13-2009 @ 12:09AM
D. Eadward Tree said...
Catalogs are quite profitable for the Postal Service, even with the 30% discount in the recent "Summer Sale". The Postal Service shot itself in the foot a few years ago when it jacked up catalog postage rates because catalog volumes dropped so much. Postmaster General Jack Potter seems to understand that any big increases in postage rates would hurt the Postal Service's profitability, as explained in "Potter Doesn't Want to Hike Postage Rates in 2010" -- http://deadtreeedition.blogspot.com/2009/10/potter-doesnt-want-to-hike-postage.html.
10-13-2009 @ 1:50PM
Todd Butler said...
WOW! What insight into the state of the US Postal System. Your readers are in for a real treat if you research your stock picks as thoroughly as you researched the Direct Mail Industry.
Of course, the fact is your ignorance is astounding!
1) The Postal Service is self sufficient. It receives no subsidies from the US government. In fact it is the cookie jar congress has been taping for many years. It is the only government agency that pays not only for the retirement benefits of its employees but also covers the cost of the benefits earned while employees were in the military. As for cross subsidies, it’s commercial mail that pays for the letter carrier coming to your home every day. The $0.44 stamp you use doesn’t cover its own cost let alone support any other postal activity.
2) Do to high postage rates and the recession; businesses have reduced their mailings resulting in lower mail volumes that are jeopardizing the financial stability of the USPS. The question is whether businesses will increase advertising mail to a level that supports the Postal Service or will the American public have to start paying for the free delivery services they receive through higher federal taxes?
3) You and the greenies keep repeating the concept that advertising mail fills landfills and destroys trees. First, less than 2% of landfill volume is utilized by inert paper based direct mail. Second, you are correct that trees have to be destroyed to make paper. Of course all of the paper produced in the United States comes from tree farms planted and maintained by paper manufacturers. The simple fact is that because of the paper industry there has been a massive reforestation in the USA unseen and unheard of in recorded history. There are more trees in our country today than where present when the pilgrims came ashore.
If this easy shot at an industry you know nothing about is standard operating procedure for you, I have to question your reason for continuing to blog. Your insight on this topic is as valuable as the junk mail you disparage.
Todd Butler