When the price of a postage stamp increases, as it did in July by a mere 3 cents, most people greet the news with a shrug. Who uses stamps or mails letters anyway? Plenty of businesses, it turns out. And when you are a company mailing millions of pieces each year, the price increase stings.
According to the Package Shippers Association, about 19 billion packages are shipped annually. Additionally, last year, 13.5 billion letters were mailed, which averages to about two pieces of mail per U.S. household per week.
So for the individual, the small increase in stamp prices probably won’t break the bank as more and more find other ways to communicate, pay their bills and send greeting cards, more often than not, digitally. That trend is certainly clear when looking at statistics. The number of individual letters mailed in 2021 dropped more than 8% from 2020 and is down 45% from 2011.
For companies that do a lot of shipping or organize a lot of mailing for their customers like eBay (Tii:EBAY), Walmart (Tii:WMT), Target (Tii:TGT) and others, any price increase is going to hurt.
If a company mails anything, mail price increases are going to have an impact. Mail sent from businesses, such as bank statements, accounts for about 35.6 billion pieces each year – about five per household per week. Marketing mail accounts for another 41 million additional pieces of mail.
Even though the mail price increase was pennies, when spread over billions of letters and packages, it adds up. First-Class mail prices are up about 6.5% overall following the latest hikes. Metered mail went up 4 cents, or 7.5%; sending a postcard now costs 44 cents, a 10-cent hike; and overweight First-Class mail will increase 20%, to 24 cents per additional ounce.
While this price hike hurts businesses that do a lot of mailing, the summer hike is expected to be the first of several. The United States Postal Service plans to boost prices twice a year in 2023, warning the increases may be steep. In May, Postmaster General Louis DeJoy said Americans should get used to “uncomfortable” postage rate increases in the next few years.
“I believe we have been severely damaged by at least 10 years of a defective pricing model which cannot be satisfied by one or two annual price increases, especially in this inflationary environment,” he said earlier this summer.
There are ways to offset the price hikes said Philip Delaney, director of operations at Harte Hanks (Tii:HHS), a global marketing services company whose services include analytics, strategy, marketing technology, creative services, digital marketing, customer care, direct mail, logistics, and fulfillment.
“For clients looking to reduce their postage costs to offset some of these increases, we always recommend the following steps,” he said.
Make sure your mail list is optimized. “Reducing undeliverable mail is always a good way to save money. Mail files should be free of duplicate records and processed through CASS certified software to make sure the addresses are standardized, accurate and deliverable. CASS software will update any incorrect or missing data to improve deliverability.” CASS software provides hardware and software developers, service bureaus, and commercial mailers a common measure by which to test the quality of address-matching software.
Mail files should also be run through NCOA (the National Change of Address database) to capture any recent address changes. NCOA processing validates each name and address in your data file, using USPS address correction that verifies the correct address for each customer. Once addresses are corrected, each customer record is matched against the NCOALink database.
Make sure your mail format avoids size and weight surcharges. “Postcards are cheaper than letters and letters are cheaper than oversized pieces or flats.”
For any large mailings, your mail should be presorted to provide the deepest discounts possible. “Depending on the concentration of your mail list, you can sort right down to the CRT level and even walk sequence.” Walk sequence is when mail is provided in the exact order in which the carrier walks or drives each route so the carrier does not need to sort the mail, which saves the USPS time and money. This savings is passed along to the mailer in the form of the lowest rate.
If you mail small volumes or larger volumes first class, consider utilizing a mail partner that can provide commingling services. “Commingling your mail with other companies mail will net postage savings since your previously non-presorted mail will now be presorted.”
Depending on the content of the mailing, you will save money if you mail via marketing mail (formally standard class). Postage is significantly less for marketing mail but the potential downside is the time in transit can be as long as 14 days (vs 1 – 5 for First Class) and some suggest that marketing mail has a lower open rate and a lower perceived value if the piece is clearly identified as marketing mail.
If you do mail Marketing Mail, consider working with direct mail companies that can provide logistics services to transport mail deeper into the postal stream. Drop shipping mail direct to an NDC (network distribution center), SCF (sectional center facility) or DDU (destination delivery unit, aka local post office) can provide significant savings.
Depending on the format, you may be able to save money by utilizing the services of DHL (Tii:DPSGY), UPS (Tii:UPS) or FedEX (Tii:FDX). “You will be more likely to save money if your mailpieces are heavy or would qualify as flats or parcels through the USPS.”
The USPS does offer ongoing promotions and discounts that mailers can take advantage of. Those programs are updated regularly on the USPS website
https://www.usps.com/business/promotions-incentives
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As letter mailing continues to decline, the Postal Service is making up for it in package delivery. The USPS handles final delivery of many packages shipped by Amazon (Tii:AMZN) and other online retailers, with items delivered in bulk to the post office nearest to the buyer’s home.
In addition to the 2 cent stamp increase, the USPS also announced in August a temporary price hike on a number of mail services for the peak holiday season to further offset rising delivery costs.
The price increases, which will range from 25 cents to more than $6 per package, will go into effect on October 2, 2022 and last through January 22, 2023 on mailings that include Priority Mail, Priority Mail Express and First-Class Package Service. “These temporary rates will keep USPS competitive while providing the agency with the revenue to cover extra costs in anticipation of peak-season volume,” according to the USPS, which enacted similar temporary price increases in 2020 and 2021 because of heightened demand and extra shipping costs.
The USPS is the most frequently used shipping method in the U.S. for e-commerce. 54% of the top 500 online shops by net sales in 2020 in the U.S. have indicated as a shipping method, followed by UPS, FedEx and DHL.
