RATE SHOCK!

The following is a perspective by postal commentator Gene Del Polito for Direct magazine.

Many within the direct marketing industry are still in a state of shock after taking a look at the rates the U.S. Postal Service (USPS) has proposed for Standard Mail parcels weighing less than a pound. The proposed rates, if approved, would result in increases ranging as high as 99.6%! Oh sure, the Postal Service has proposed deepening the drop ship discounts for such parcels, but the drop ship incentives come no where near what would be needed to offset postal rate increases of this magnitude.

For sure, not every Standard Mail parcel shipper will be facing 99% rate increases, but many fall very uncomfortably within the 30-40% range. I don't know how the USPS or the Postal Rate Commission defines "rate shock," but there's no doubt in my mind that increases that are more than 10 times the cumulative rate of inflation since rates last rose sure sound like rates that most definitely would induce rate shock. In fact, for some Standard Mail parcel shippers, the cost of the rate increase alone would consume some companies' total annual operating profit.

People are asking what in blazes the USPS was thinking when it put this proposal together. People want to know if the USPS did any research at all to determine the impact of these increases on the businesses that are built around using the Postal Service's Standard Mail service. They also want to know how increases of this magnitude could pop up in the space of the very short year since rates last rose. Even moreso, they want to know that if the Postal Service knew its Standard Mail parcels costs were rising so phenomenally, why something was done long before now to contain parcel processing and delivery costs, rather than just hiving off the bill for postal inefficiency on customers.

These are just some of the issues that will be in play as the R2006 is heard by the Postal Rate Commission. Just airing issues, however, won't be good enough. Customers are going to want to know exactly what the Postal Rate Commission and the Governors of the Postal Service are going to do to make sure no one gets put out of business because the postal gnomes weren't minding the store.

When you see things such as this, you've got to wonder if the Postal Service has any understanding at all about its customers' businesses. You also have to wonder how they could doubt the call for a strong regulator under postal reform, when it's clear that without a vigilant regulator some businesses would simply be kaput.