Marketsmith, Inc. - Marketsmith in the News

Please read our controller's evaluation of the PRC recommendation and the devastating impact it will have on the catalog industry. We need to get the word out, especially to the press. Please pass this memo along to anyone who can help to make a difference. We need to have this decision reconsidered immediately!

Sincerely,
Ellen Pullman

From:  Crofoot, David
Sent:  Tuesday, February 27, 2007 10:52 AM
To:  Pullman, Ellen; Boyd, Kim
Subject:  PRC recommendation

Hello industry friends,

From the news this morning, you would think we at Johnson Smith would have the wine flowing in celebration of the PRC's (Postal regulatory commission) decision to lower rates below that which was proposed by the Post Office. The entire media has picked up the verbiage from the press release from the PRC letter, which frankly and unfortunately, is very misleading.

For anyone who doesn't mail letters, the news is all bad. The PRC reversed the USPS's position that flats and letters should not have a wide discrepancy in pricing. In the process, the catalog industry took it in the chops - Enhanced Carrier Route (ECR), the most common cell for a piece rate mailer, increased between .8 and 1.6 cents, depending on how deeply you enter the system, and that's above and beyond the increase proposed by the USPS. We need to get the word out, the PRC press release is true only in the fact that the overall rates decreased (particular single piece letters). At the cost of lowering the 1st class stamp by 1 cent, they have hammered the business community, and many catalogs may not survive it. As they say, there is no free lunch and the devil is in the details - both seem very applicable to the PRC's decision.

Take ECR, SCF entry - The current rate is 17.1 cents . The USPS proposed 19.9 (16%), which is no picnic coming on the 5.5% increase in January 2006. The PRC came back with 20.7 for flats and 18.4 for letters, which is an average of 19.6, so I guess you can say the PRC lowered it from 19.9 to 19.6, but unfortunately for catalogs, we have an extra .8 cents, so instead of a 16% increase, nows its 21%.

And if you are a smaller mailer, without carrier route penetration, the news is worse - The 3 digit sort, AUTO (current rate is 27.5 cents) - the USPS proposed rate was 32.8, for a 19% increase. The PRC came back with 39.2, or 43% increase. That's the same as putting an out of business sign on small mailers and makes entry into the catalog industry almost impossible.

Please pass this on as you see fit. The industry groups are in the process of analyzing the rates, but from what we see, its very bad news, and we will need everyone's help if we are to succeed in having the USPS Board of Governors revisit this very bad decision.