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Saturday, Jul 20, 2024

New Postal System to Impact Many Businesses

The U.S. Postal Service is reshaping its business model and the changes could have a significant effect on local companies. Starting May 14, the rate and fee structure for all classes of mail will be priced by shape and not just weight.

The new prices reflect differences in the cost of handling letters, large envelopes, also called flats, and packages.

Currently, it costs 63 cents to mail a 2-ounce first class letter, 2-ounce flat or a 2-ounce parcel. The new plan recognizes that each of these shapes has substantially different processing costs and should have different prices.

“This is a significant change in the way we operate,” said Dave Partenheimer, national spokesman with the Postal Service, which handles 212 billion pieces of mail per year.

The Postal Service’s revenues will increase from $73 billion annually to $77.6 billion this year, Partenheimer said.

The Postal Service is implementing the new system, which is similar to weight-based fee scales used by FedEx, UPS, DHL International Ltd. and the United Kingdom’s postal service, due to increased costs associated with handling mail that cannot be machine-sorted, he said.

Major Effect On Small Biz

Ron Holmes, owner of the San Diego franchise of Valpak, said the postage increase will have a significant impact on his business and other small companies.

Valpak coupons are sent out to 500,000 households each month in San Diego. “We will pass on at least a portion of the price increase to our clients,” admitted Holmes. “I don’t know if our clients have been able to pass on the price they will incur, but certainly a portion will be passed on to their clients.”

He said that largely small businesses and consumers tend to absorb the brunt of postage increases.

PostalAnnex+ Inc., a San Diego-based franchise company that provides postal, packaging and shipping, as well as Web site services to small businesses, is working to update computer software in its 65 San Diego locations and 312 nationwide locations to accommodate the Postal Service price and fee changes.

Steve Goble, vice president of marketing and communications for PostalAnnex+, said while software updates will not cost the company under its annual support agreement with San Marcos-based PC Synergy, it could cost as much as $75 to $150 to upgrade letter scales.

“This is a more complicated change,” said Goble. “The change to size-based mailings complicates what people need to know.”

PostalAnnex has been sending out educational materials to all of its locations since first learning of the new system March 19.

Opportunity Knocks

PC Synergy President and founder Rick Crawford said these changes are definitely creating more of a demand for his company’s product and services.

“In the big picture, this shift helps us,” he said. “The more complex, the more people need us.”

While Crawford did not have specific projections of revenue increases associated with the change in price and fees, he is seeing more and more clients purchase his company’s product, PostalMate. It calculates prices with user prompts, including dimensions.

PC Synergy’s PostalMate programming costs $295 to set up and a $65 monthly user licensing fee covers all technical support and updates, such as the update needed for the Postal Service changes, Crawford said.

Multimillion-Dollar Increase

San Diego Gas & Electric Co. will feel the postal and fee change with a 4.9 percent increase in postage costs, according to spokesman Peter Hidalgo.

Each month, SDG & E; sends out 1.2 million bills and notices and each one will soon cost a couple of cents more to send. According to the Postal Service, postage for envelopes containing utility bills will increase from approximately 29 cents to 31 cents.

“We are aware of the changes and prepared for the changes,” said Hidalgo, who added that the company had budgeted for the price increases but did not disclose figures.

He said that SDG & E; continuously strives to control the costs of mailings. The utility company provides an e-billing system called “my account.”

Partenheimer said this is the first time the Postal Service has placed such a large emphasis on the dimensions of a letter, large envelope or parcel. Prices go into effect for periodicals such as magazines and newspapers sent through the mail starting July 15.

For a business that has largely shifted to automated services in the past few years, the adjustment to shape-based pricing is just one more way to streamline the process and decrease the number of mailed pieces needed to be handled by hand, Partenheimer said.

“We are encouraging mail that we can process more efficiently through our systems,” he said.

The impact of changes will be felt by many, including businesses that send letters, statements, postcards and collateral materials, such as banks, utility companies, marketing businesses and retail stores.

Businesses that send out mailers with detached address labels, such as the PennySaver, a weekly shopping guide, will see a 1.5 cent increase per piece, according to Debbe Cannone, business mail entry analyst for the San Diego district of the Postal Service.

Training Intensifies

The Postal Service pricing changes are also leading to more training for employees.

All area and district rate coordinators for the Postal Service will go through mandatory training this month.

Cannone will attend the national training session in Chicago, and conduct internal district training for the 1,700 Postal Service sales employees in the San Diego area.

“We have to get all of the people on this side of the counter up to speed,” she said. “And then customer training sessions will start in late April.”

Already, Cannone is working with hundreds of large mailers such as marketing groups, banks, utility companies and newspapers; field representatives are visiting businesses; and seminars for businesses are being held to answer questions before May 14.

Questions surrounding the new system are likely to increase this week as the Postal Service starts selling 41 cent stamps April 12. First-class postage for a 1-ounce letter will increase to 41 cents from 39 cents.

A wedding invitation typically weighs 2 ounces because it contains multiple sheets of paper and return envelopes, Partenheimer said.

After May 14, a wedding invitation that weighs 2 ounces will cost 58 cents, a 5 cent drop.

A 2-ounce large letter envelope will increase from 63 cents to 97 cents, and a 2-ounce package will increase from 63 cents to $1.30.

Questions are being fielded by representatives of the mailing requirements hotline at (858) 674-0400. Information can also be found at www.usps.com/ratecase.


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