NEW YORK (AdAge.com) -- The United States Postal Service's plan to eliminate a day of mail delivery could affect more than $1 trillion worth of business via direct marketing and catalog mailings. But for now those sectors of the industry are preparing to adjust to a new reality rather than preparing protests.
Members of the Direct Marketing Association haven't united in one position to the proposal. "Some say they can adjust, but others say it will hurt their business model," said Jerry Cerasale, senior VP-government affairs for the DMA.
Mr. Cerasale said direct marketing accounts for $1 trillion in sales and jobs in this country, while the more than 15,000 catalog companies help drive more than $200 billion in sales, according to the American Catalog Mailers Association.
Businesses that rely on the mail might not necessarily be imperiled by the USPS plan, but they certainly will have to adjust.
Postmaster General John Potter said earlier this week he will submit a formal request to the Postal Regulatory Commission to reduce mail delivery from six days a week to five, eliminating Saturdays. Saturday is one of the lightest days, along with Tuesdays, for mail delivery.
The decision was simple, Mr. Potter said. The USPS is hemorrhaging money. The Post Office lost $2.8 billion last year after total mail volume dropped to 202 billion items, some nine billion less than in 2008.
An independent study commissioned by the Postal Regulatory Commission estimated that eliminating a day of delivery would save the USPS almost $2 billion a year. The Postal Service's own study put the cost of savings at $3.5 billion annually.
None of this will happen overnight, of course. After receiving the formal request from Mr. Potter, the Postal Regulatory Commission must hold a series of public hearings around the country before issuing an advisory opinion. And then Congress has to become involved, since having six-days-a-week mail delivery is a federal law.
Still, the likelihood of it happening is good, and businesses will have to adjust. Many companies, for instance, utilize mail-specific, or "in-home" dates, which are days specified by the mailer to have a catalog or flier delivered so it coordinates with other promotional activities.
"It doesn't do any good to have something delivered two days after the sale is over," said Hamilton Davison, president-executive director of the American Catalog Mailers Association.
Push to lower costs
Mr. Davison said he has had a chance to review Mr. Potter's operational plan for reducing mail delivery by a day and said his organization supports it to help save the Post Office -- but only to an extent.
"It's absolutely essential that this is done and I think the plan is sound. We'll need lead time, but it's achievable," he said. "But something has to be done with costs. Heck, we'd take three-days-a-week delivery if it translated into lower costs."
Mr. Davison noted that since 2006, the average number of pieces of mail per household has dropped from six to just under five. Also during that time, the catalog industry has gone from 20 billion pieces of mail per year to 12 billion last year.
"The degradation is due to the massive rate increase that took place in 2007. That changed catalog mailings and drove many companies to curtail circulation volume," Mr. Davison said. "That's why I said that, for us, it's less about delivery days and more about costs. If the USPS can get it right, there's no reason why both of us can't have growth going forward."
Mr. Cerasale said DMA members will also adjust given enough notice, but some businesses still utilize first-class mail to send and receive payments, meaning the elimination of Saturdays causes "a loss of float time." Other businesses like to utilize regular mail to communicate with new customers, sometimes twice a week.
"If you eliminate a day," he said, "it dramatically undercuts their plan to try to market to people."
Proctor & Gamble, for instance, doesn't have a big direct-marketing budget proportionate to its overall media spend -- estimated by Ad Age to be $9.73 billion worldwide -- but still spends a pretty penny on direct mail, such as Pampers coupons and its new direct-mail beauty magazine, Rouge.
A company spokeswoman declined to comment on the USPS proposal, saying its "marketing plans are competitively sensitive."