Industry Newsletter

Dear Members and Friends:

New membership commitments: Cigars International, CMS Direct, Curtis Barry & Co, J.S. Eliezer Associates, Lenser, Marketsmith, Shades of Light, Sporty’s and Williams Sonoma. We welcome and thank these fine companies for their support!

Decisions made at the top? If you are a CEO, CMO or CFO reading this, you are in the position to see the big picture and make the decision to allocate some precious resources in an area it will pay back rich rewards. If you are on the fence, uncertain but curious, please give me 15 minutes of your time. In that short time, if I cannot convince you of the pressing need, then you will remain with my gratitude for having listened. You may find that our work is compelling for your company and support us. You may also determine that it is not the necessary expense that must be made now. I will take my chances. Give me a call 401-529-8183.

ACMA continues important work with the USPS: Last month, we had another “top-to-top” meeting with the USPS. We met with PMG Jack Potter and other top USPS executives who control our future with the mail: CMO Anita Bizzoto, VP Pricing Steve Kearney, VP Legislative Affairs Marie Therese Dominguez, and others including his chief of staff. Due to a time limit on our meeting, I asked Monica Smith, CEO of Marketsmith to join me. Monica’s firm works at a deep level with a variety of catalog companies. She has intimate knowledge of these companies’ financial performance and operating priorities. Monica has personally reviewed over 200 cataloger P&Ls and her company works with catalogers who sell less than $5 million to over $50 billion each year. Together, the two of us presented the state of affairs in the catalog industry and what the future holds given the trajectory we are on now. Our message: catalogers are moving as fast as they can to reduce their dependence on mail. Once they build infrastructure and hone their business to mail less, they will be harder to invite back into the mail. This outcome is clearly not in the best interests of the USPS or even for the broader mailing industry.

Catalogs deliver value in the mail: Mr. Potter “gets” the value that catalogs play in the mail stream, the content value to the mail recipient that makes mail more relevant for all types of mail borne messages. He has seen the Postal Service’s own studies that indicate Americans like their catalogs, and look forward to receiving them. He understands that together as an industry, catalogers contribute billions to USPS coffers and cover a significant portion of the overhead cost of running this nation’s mail system. He is familiar with the R2006-1 rate case and the huge rate increase it created for our industry. He challenged me: postage is not the only thing going up for catalogers. Why the pressure on the USPS? Aren’t catalogers under pressure from paper, ink, freight, and other costs?

USPS understanding of cataloging: The USPS did not clearly understand the magnitude. We responded that marketing costs represent about 35% of sales for a B2C cataloger with postage typically 50% of this cost or 17%+ of total sales. All these other cost centers amount to less than this when taken together. Thus, the impact last year’s postage increase is game changing. More, since well run companies make 5% on sales, a 30% increase to a 15% cost takes a well run company to breakeven. Unfortunately, the USPS has not had the opportunity to become intimately knowledgeable about our mail segment and did not understand how fundamental the impact of the last postage rate increase has been.

Space does not permit me to detail all the items discussed. This remains a work in process. We continue our dialog with USPS officials about the range of acceptable alternatives to address this situation. This was a very productive meeting on circumstances facing catalogers and why it is so critical that we address the rate shock our industry is in now.

USPS volumes: In our meeting, we also explored how the USPS and catalog industry can work together to grow volumes. We examined different approaches being used by other industries and the incentives that might be considered to encourage catalogers to not only mail more flats but also send more packages their way. Recognizing that the USPS decision making process is complex, I stressed the urgency that these issues be addressed.

Organizing around the customer: I also asked the USPS to consider forming a catalog team charged with growing volumes across all our mail classes. As catalogers today, we have to deal with a wide variety of USPS personnel for each of their products. No one is a catalog specialist with deep understanding of our industry and needs. We would like to see the USPS establish a multidisciplinary team headed by a senior level person charged with becoming expert in our businesses who can partner with us to solve problems, grow volumes and address unmet needs. At the end of the meeting, the PMG said the USPS would do an internal review of a different structure.

Washington Catalog Forum: Mr. Potter also committed to a USPS catalog summit in Washington where we can expand the dialog between the catalog industry and the USPS. This will be a wonderful opportunity to get our industry leadership in front of key USPS decision makers to build on the dialog we have established. Look for more information in the next few weeks.

Slim Jims to slim down? A format that many are testing or adopting is under pressure of losing its impact. We are communicating to the USPS that they can’t provide an “option” to egregious cost increases on one hand then remove it after many work so hard to adopt it. Most urgently: if you are now or are considering using the “slim jim” format (folded catalog tabbed to be a letter shape), then we need to hear from you right away. The USPS is considering a major revamp to the slim jim format and the catalog industry must comment to the extent this is an important format we want to mail. The proposed rules may have a great deal to do with the maximum number of pages per piece and response rates. Some of you see this as a key part of your mail plan in the future. We hope those now using or planning on slim jims in the future will get in touch right away so we can consider your views in how we respond and follow this matter.

ACMA was instrumental in getting more time to implement the Intelligent Mail Barcode. The implementation date has been pushed to May 2009 but don’t wait to understand and react to the implications for your firm. New regulations covering the IMB and address placement have recently been issued which are under review and study by ACMA’s Technical Committee. Members will be receiving a Technical Bulletin shortly detailing these.

“Do Not Mail” doesn’t go away: Work continues on the Do Not Mail front. This is a highly complex issue with numerous viewpoints driven by the variety of business models and how address suppression affects individual mailers. ACMA’s Do Not Mail Task Force continues to work on the issue and has expanded the participation to include some others in our industry to better sort out the right direction for catalogers. We will report on this as appropriate going forward.

Our Challenge - ACMA must grow to over a hundred catalogers for our work to be sustainable. Given the pressure on P&Ls in the “possible recession,” many of you indicate you are having a hard time coming up with the price of admission. Let’s put the price of ACMA membership in perspective; at a quarter of a percent of what you spend on postage, as of next month, your ACMA membership investment has paid you back in less than 90 days! It’s really a faster payback since postage increases are cumulative, your ACMA investment will continue to pay dividends for years (the ongoing value of $150 million rate mitigation for catalogers). Your support is critical now.

We have grown to 60 plus members in one year. This is an important accomplishment. We need to grow to 100 or more in the next six months. Those of you who have been involved in postal affairs over the years have recognized the impact we have made in a short period of time. Those of you who are new to the game and are participating have expressed pride in our accomplishments. Those of you who admire our progress but don’t join because you assume others will carry the load are making a mistake. The Postal Regulatory Commission and the USPS top management have told us they need us to help them develop solutions to the problems we share. This commitment is not a “nice to do,” IT’S A NEED TO DO. OUR VERY SURVIVAL IS AT STAKE.

Please do your share or we can’t: Postmaster General Potter specifically wanted to know how many catalogers belonged to ACMA. We cannot be your advocate without you! Help unite the industry for our own welfare. Please join us today. Take control of your future now.

Sincerely,
American Catalog Mailers Assn.

Hamilton Davison
Executive Director

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Thank you!