As expected, the United States Postal Service filed their proposed 2017 price changes in October. There is a lot of buzz surrounding some of the changes, specifically the change in the “second ounce free” being up to 3.5 oz.
Simplification in this case is a good thing for mailers and should help continue to drive more trans-promotional opportunities.
There was also a major change in drop-ship discounts for standard mail letters (now called marketing mail), as the discount for drop-shipment from the origin site to the Sectional Center Facility (SCF) decreased by over 22 percent. In addition, the spread in the discount between the Network Distribution Center (NDC) and the SCF decreased by 11 percent. There is a small off-set to this in that the proposed rates increase the discount for automation sorting.
But no one seems to be talking about the postage rate decrease for next year. The industry understood that as the exigent rate increase expired, postage rates would reduce. But in these newly-proposed rates there’s another postage rate decrease that’s not related to outside factors like a great recession, and that’s good news for many first-class mailers.
Postage Rate Changes Ahead
The proposed price for a first-class letter sorted to the five-digit actually decreases by 0.8 percent or $0.003. Comparatively, the current rate of $0.376 to $0.373. And while rates for the Automated Area Distribution Center (AADC) and the Mixed Automated Area Distribution Center (MXD AADC) increased by $0.004, the incentive to mailers to find that additional five-digit discount is significant. The United States Postal Service proposed increasing the spread in discount between the AADC (the three-digit finally goes away) and five-digit sortation increases from $0.023 to $0.030. That’s an additional 30 percent in discount for that five-digit. For example, picture a a mid-sized first class transactional mail specialist. They creates 3 million pieces a month. If they went from three digits to five, it would save $90,000 a month. That’s more than $1 million annually.
If these proposed postage rate are implemented, the incentive will be in place. Mailers of all sizes could maximize that five-digit penetration on first-class mail. Customers who’ve invested in merging print streams through a digital process, material process or comingle process could thrive. They can easily take advantage of these rates.
Likewise, customers who haven’t moved down these paths have new motivation. Whether it didn’t make financial sense, or the effort wasn’t worth the savings, they may now find a better partner solution. It could allow them to take advantage of next year’s postage rate decrease.