The U.S. Postal Service expects approval of its largest rate increases ever next month, but business mailers say the effect could mean big changes in advertising and catalog sales and could burden consumers as well as businesses with far more than the designated hike.
The Postal Rate Commission is expected to make its recommendation Jan. 4 on the service's request for increases that would boost the cost of all types of mail by an average of 19 percent and raise the cost of a first-class stamp from 25 cents to 30 cents.Historically, the independent commission's recommendations vary little from the rate increase requests by the service, which is anticipating the new rates could become effective as early as Feb. 3.
The new increase comes on the heels of another in 1988 and the cumulative effect, according to some business leaders, is bad news for business and consumers, and perhaps eventually for the Postal Service itself.
"The end effect for business will be big businesses will look more carefully at alternatives, private sector delivery, and with the advent of fax machines and electronic transfers, many will be able to circumvent the Postal Service," said Tracey Schreft, associate director for the U.S. Chamber of Commerce small business center.
"For many of the smaller mailers, they may not survive this rate case," Schreft said. " . . . They just can't afford to go to alternatives. It costs them more in increases than they can make up in profits."
The Postal Service has estimated the 5-cent hike in first-class postage will cost consumers an average of $10 to $11 per year, but Schreft says the cost will actually be much higher.
"Businesses will pass on higher costs to consumers," she said. "We anticipate that the average American household will have to spend an average of $88 more on postal service, directly and indirectly."
Consumers who like getting mail order catalogs will also likely see fewer of them, according to Chet Dalzell, spokesman for the Direct Marketing Association based in New York.
Dalzell said catalogers face a 30- to 35-percent increase under the current rate proposal and already saw rates for many third class categories rise by as much as 35 percent in 1988.
Catalog firms will be sending fewer mailings to "prospects" or will turn to abbreviated versions of their catalogs on cheaper, lighter paper to trim costs, he said.
"Mailers will be evaluating mail costs," he said, adding some will cut their ad costs for media advertisements to make up the rate increase while others may "flush their postal marketing and go to other media."
But Dalzell and other experts say bigger advertisers and publishers are increasingly looking to alternative private sector delivery to circumvent costs of third and second class mailings.
"We do need to develop an alternative to the Postal Service to, one, spur on competition to the Postal Service and, two, just for survival," he said.
Dalzwell cited a 1988 study showing that 28 billion of pieces of mail could legally be diverted from the Postal Service if a national network of private delivery was in place.
Schreft said private delivery represents an eventual threat to the post office, but Postal Service spokesman Art Shealy says figures show its mail load is continuing to grow.
Even during a time of explosive growth in the use of fascimile machines, the Postal Service delivered 166 billion pieces of mail in fiscal 1990, up by 5 billion from the year before, Shealy said. He added that 94 percent of the mail is business-related.
Shealy said the proposed new rate structure offers more options than ever for business mailers to get discounts by using methods such as pre-sorting, bar coding and nine-digit zip coding that save the Postal Service handling costs.
"We offer the greatest incentives for that type of mail that is going to help us do our job better," Shealy said.
Noting that the Postal Service receives no tax dollars and must operate on its own revenue, Shealy defends the rate hike as merely reflecting increases in the cost of doing business.
Like other businesses, the Postal Service has been hit hard by rising costs such as health insurance and, more recently, higher gas prices for its extensive fleet.