Multi-Channel Retailers Scramble to Find Alternatives in Response to Proposed Postal Rate Increase of Nearly 6%

Furniture World News Desk on 10/17/2013

Among multi-channel retailers that rely on mailing everything from full catalogs to postcards to prospect for and draw customers to stores or ecommerce sites, the U.S. Postal Service’s (USPS) proposed rate hike of 5.9 percent, the largest since 2007, has driven many to evaluate less expensive alternatives. With the Postal Regulatory Commission (PRC) having up to 90 days to rule on the proposal, the price hike could go into effect as early as January 27, 2014, if approved.

In an open letter posted on its site, the American Catalog Mailers Association (ACMA) further warned that the PRC can apply the increase differentially to each class of mailer, which could include a surcharge on Standard Flats used to send full sized catalogs that could be as high as 10-12%.

For many multi-channel retailers, simply paying the higher mailing rates is not an option. Instead, early feedback suggests that many intend to reduce catalog circulation and send frequency, or turn to less expensive forms of mailing such as mini catalogs, or digital promotion methods including search, email, display and social media advertising.

The rate hike was recently proposed by the USPS Board of Governors as part of an effort to close a USPS $20 billion dollar budget gap. It goes beyond an annual Consumer Price Index increase of 1.6 percent to include an extra 4.3 percent “exigency” hike above the inflation rate.

Such a rate hike, if approved, “will do real damage to an industry still struggling to adjust to the exorbitant 2007 rate hike where many companies are struggling mightily, mail volumes are depressed, and the availability of quality names to mail is diminished,” writes Hamilton Davison, President and Executive Director of the ACMA.

In the face of the proposed postal rate increase, with the possibility of even higher rates on full sized catalogs, some catalog mailers are weighing alternatives. One option is so-called “Mini “Slim” Catalogs.” Despite having fewer pages, mini catalogs allow companies to cut production costs without sacrificing circulation or frequency.

Though not considered a replacement for full-sized catalogs, mini catalogs can be used on a case by case or supplemental basis to fill the void of a catalog that otherwise might not be sent due to increased postage costs.

Mini catalogs mail at the cost of a standard automated letter and provide up to ten pages to promote products. They can cut mailing and production costs by a third, helping to offset the increase in mailing costs. They can also be as effective as larger catalogs in response rate as well as driving customers to company websites.

For multi-channel retailers mailing postcards or several page mailers, the mini catalogs can provide more pages and promotional real estate at similar cost. The result is greater promotional impact that will help to offset the proposed USPS price hike.

“We’re getting about a third better response with our mini catalogs than with our previous catalogs, and a much better response than our previous postcard mailings,” says Elizabeth Johnson, a graphic designer involved with marketing for Germantown, Md.-based Browning Pools & Spas, which has two retail stores and has designed, built, and maintained swimming pools in the state for generations.

Where a marketer is doing four to five mailings a year of full-sized catalogs, supplementing their schedule by doing three full-sized catalog mailings and two mini catalog mailings, for example, can significantly lower cost without lowering response rates. While mailing a full-sized catalog can cost 57 cents a piece at a million mailed, mailing these new mini catalogs can cost as little as 28 cents a piece at similar volume. This can make mini catalogs a cost-effective alternative even to postcards.

Case Study:  With retail sales hit by the recession, Browning Pools & Spas was looking to improve sales.

“When the economy started south, we didn’t want to cut back on our direct mail but had to look for more effective ways to keep our company visible to customers,” says Johnson.

According to Johnson, in the past the company had relied mainly on postcards and a six-page, locally produced catalog for promotion, but these had drawbacks.

“Because the six-page catalog was a bit too costly to print and mail, we limited it to two mailings a year,” says Johnson. “With its wafer seals, the catalog too often arrived in the mailbox torn with bent corners, and was hard to open. Postcards were somewhat effective, but only if done over and over; after weighing their cost, postage, and promotion area, they weren’t much bang for the buck.”

When Johnson turned to a ten-page Mini “Slim” Catalog, she found it more spacious and less costly to produce and mail than the previous six-page, locally produced catalog. “We’ve expanded our promoted products and services to customers with the mini catalogs,” says Johnson.

“We’re now producing and mailing ten-page mini catalogs three times a year during each of our two peak seasons for less than the cost of mailing our previous six-page catalog twice a year,” says Johnson. To achieve this, Johnson says that B&W Press, her Georgetown, Mass.-based printer specializing in direct marketing, typically prints a full run, then breaks it into three separate mailings, mailed about two weeks apart during the critical spring and fall seasons.

“With the added space and promotional repetition, we’re cross promoting a complementary range of products and services. We’re promoting on a much larger scale and getting a much bigger bang for our buck,” says Johnson.

For more information on mini-catalogs, call 877-246-3467; email csr@bwpress.com or visit www.bwpress.com.