Print and Mail Industry Predictions For 2016
From the Bottomline Nov./Dec. Edition
2015 has been an interesting year for our industries. We have seen businesses experience both success and failure but struggle at times to understand why. In this article, I want to make some predictions for what 2016 holds for our industry. These are my thoughts on what we will all experience in the next 12-18 months.
For my first (and safest) prediction, I see continued change. Ben Franklin once stated: “When you are finished changing, you are finished”! This applies perfectly to our industry. For those of us in print and mail, success and failure do not seem to be solely reliant on company size, equipment or ownership structure. I believe that successful companies understand that our industry has evolved. They have moved from focusing on things like ink/toner on paper to communication. Further, they know their success depends on how well they have and continue to adapt. We will continue to see consolidations, closures and mergers in our industry but that has become “business as usual” and should not be a surprise to anyone. How we take advantage of these opportunities is what will make us relevant and successful.
My second prediction is that the United States Postal Service (USPS) will lead a great deal of this change. Yes the post office! Anyone following the developments with regard to mail understands the ambitious goals this organization has set and the technologies and data they are finally harnessing. The USPS is no longer focused solely on mail delivery. I believe they have successfully transitioned into a data organization that delivers mail of all shapes and sizes. During National PCC Week, the Postmaster General (PMG) Megan Brennan delivered her message to the industry which focused on bridging physical to digital messaging.
For years the foundation of this “bridge” has been the Intelligent Mail Barcode (IMb). Our industry has successfully transitioned over 90% of our mail pieces to include an IMb so the foundation is strong. In the same message, Brennan noted how IMb tracking is essential to strategically time multichannel messaging. Last year I predicted that mail tracking would revolutionize the mailing industry and it has. The PMG pointed out that organizations now have the ability to prepare IMb an IMpb enabled mail pieces and track them with “unprecedented visibility and predictability”, enabling effective multichannel marketing.
Enter the USPS’ Real Mail Notification program. Successfully tested in Northern Virginia and slated for a fall 2015 trail in New York City this program allows the mail recipient to receive pictures of all mail pieces that will be in their physical mail box that day. These notifications are sent through e-mail in the morning before delivery has occurred. People will be able to see what pieces are waiting for them that day from wherever they are using their mobile devices. This system is still in trial and the USPS is actively working with industry representatives to discuss possible issues but at the very least this shows the power of the data the USPS collects. The system is not perfect but the fact is that the USPS has “connected the dots” here and is finally using the promise of the IMb, IMpb and other technologies they have invested in. In my opinion this will enhance the value of physical mail. People in our industries are looking for ways to bridge the high-touch of mail to high-tech devices we all have. We all understand that multichannel messaging works. Forward thinking companies in printing and mailing services should learn more about this program and develop integrated services and invite their customers to participate as soon as possible.
Technology is key to increasing the value of paper mail by making it more interactive and digital-friendly. The USPS understands this and is leading the way for the first time in my memory. Real Mail Notification expands the field of options to things like: QR codes on direct mail pieces which, when scanned can take the consumer to online content or taking advantage of advances in geo-fencing that can add coupons to a mail piece (Or an image of one) based on a business address and radius. The possibilities are endless.
Finally, I predict that our industry will find a way to address the USPS’ financial crisis. Some may not view this as a crisis but they do not understand the issues fully. Without a financially stable postal organization to deliver universal service we are all at risk. The private carriers in the industry depend on the USPS to deliver efficiencies their networks cannot achieve. Talk of one of them taking over the USPS is naïve and we have to realize that privatization is not a realistic possibility without significant cost increases and loss of universal service which none of us want. That leaves three options: Meaningful and significant legislative relief, USPS price increases and compromise.
I do not believe that meaningful and significant legislative relief will come in the next year. 2016 is an election year and the elected officials know that their constituents do not want to their postal services diminished or worse sacrificed. Our industries have not done a good job of finding a way to properly communicate how dire the finances of the USPS are. Totally supported by revenues they gain from the sale of postage the USPS is out of options. For the last 8 years the USPS has focused on operational efficiencies to save them billions of dollars. While they have been effective there are no more “game changers” left for them to turn to. I agree that there are efficiencies to be gained but the associated savings do not come close to providing the relief that is needed.
To illustrate how dire the USPS financial outlook is, the current CPI numbers and all of the “banked” authority would only allow the USPS to collect about $262 million in 2016. Sounds like a lot of money right? The weekly USPS payroll is $675 million! With the 4.3% exigent increase set to expire in early April of 2016 the USPS faces an even larger deficit if something is not done. Because the CPI numbers they must follow are so small, it is widely thought that the USPS will not seek an increase in 2016. This was widely discussed at a recent industry meeting so right now it looks like we are headed for a postage decrease in 2016. As a “worst case scenario” I still encourage our industry to plan for a 1% increase and hope they spend all they have allocated in their budgets so we see volume increases across all mail classes which will generate revenue for the USPS.
We can all agree a postage rate decrease would be nice but compromise involves sacrifice. Ben Franklin said the sign of a good compromise is that neither side is happy! I believe that is what will eventually happen here. Doing what is right is sometimes difficult but the long term health of our postal service is too essential to our industry for any single segment of the market to get all that they want (Or think they want). I always hear people in our industry asking what size of an increase they should plan for. Please tell your customer partners to plan for an overall increase in the 0.5%-1% range and tell them to spend their entire budgets should rates go down. Show them how you can do more projects should rates go down which will serve them well and drive growth for your business. In short capitalize on the opportunity and help the USPS build volume throughout their network!
Although legislative relief is doubtful there is a current bill being discussed (Senator Tom Carper’s new bill called iPost) which some merit. It does not appear to have the bi-partisan support needed to even get serious discussion going in both houses of Congress. Without discussion there is little chance of it being introduced in either the Senate or the House. I do believe there is a chance for some “piece meal” form legislation to be passed. In my mind, Congress should focus on the pain points we all know and address them one by one. For example, if Congress could focus on relieving the USPS of the prefunding of future retiree health care costs for workers who have not yet been hired (And never will be) that alone would be the “game changer” everyone is looking for. If this were done, it would facilitate focusing on the needs of the three main postal industry stakeholders—mailers, labor, and the USPS itself. Each have been conducting closed door discussions on the situation for years but each still refuses to compromise on protected issues that conflict with the others' priorities.
Some relief could also come as a result of the USPS’ October request for a Competitive Products price change filed with the Postal Regulatory Commission. From what I have seen in the filing they were very “strategic” in how they structured this request. Rather than seeking an across the board increase, the USPS carefully selected areas where there is room to raise pricing while still maintaining its competitive edge (i.e. residential delivery). Furthermore, the USPS has addressed the claims from their competitors to the Postal Regulatory Commission (PRC) that the USPS is not covering their institutional costs. The USPS has successfully defended their cost coverage formulas so far but these adjustments filed in October will help going forward while focusing on the volumes these competitors depend on the USPS to help them deliver.
Nobody likes change, but it is a reality. The growth in competitive shipping arena is one of the USPS’ greatest achievements since their financial decline began in 2007. While this segment of their business has experienced phenomenal growth, profit margins are significantly less robust than the profitability of First Class Mail. As printers and mailers our focus has to be on getting the USPS to a sustainable “balancing point” for the foreseeable future. This is another step in the right direction. Each of these developments will involve compromise from all industry stakeholders.
In summary, I want to state that I see plenty of opportunity in our industries. Paper mail is not going away. Print is still relevant, powerful and an effective part of the marketing mix. Mail volume continues to decrease, but at a slower rate than previously. I believe we will see an average annual decline between 3 and 4 percent over the next few years. Despite the decline in mail volume, we should all leverage the opportunity e-commerce represents. This allows proactive businesses to generate revenue and grow by adding services like fulfillment, parcel handling, sorting and mailing. We are seeing the emergence of multichannel (paper and digital) marketing. I believe the USPS is taking the lead on this and has successfully transitioned into a very smart data organization. They are not yet as nimble as they will become which will solidify their place as a true technology leader.
Innovation is all around us. We have already seen significant changes in the past few years in the types of media and technologies being used by businesses to keep and acquire customers. In no industry is this more apparent than in our industry. I believe there is still much more to come as we find ways to marry digital and physical communications. It will be exciting to be a part of this going forward.
