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USPS scraps mail promotion, cannot afford the discounts

Tuesday, June 25th, 2013

The US Postal Service has abandoned a promotional initiative designed to encourage business customers to use its new track and trace system – because it cannot afford the discounts.

The USPS asked regulators for consent back in April to run the so-called Technology Credit Promotion from this month until May 2014.

But originally the Postal Service proposed hiking its postage rates in order to recoup the money handed out in discounts.

Earlier this month, the Postal Regulatory Commission granted permission to give the Tech Credit to mailers – but refused consent for the requested extra headroom in the USPS price cap.

Yesterday the Postal Service said that given its current financial situation, it has now decided to scrap the whole promotion.

“In light of [the Commission's] findings with regard to the price cap treatment of the Technology Credit promotion, and in light of the Postal Service‚Äôs present financial position, the Postal Service has determined not to proceed with the promotion,” the Postal Service said in a brief statement to regulators.

IMb

The original Tech Credit proposal would have given mailers a one-time payment to encourage them to put in the investment to adopt the USPS Full Service Intelligent Mail barcode (IMb).

USPS wanted to offer a $2,000 credit for firms mailing more than 125,000 pieces at a time, rising to $5,000 for those mailing more than 2m items at a time, through various business mail categories including First Class Mail and Standard Mail.

Postal Service customers warned regulators that an initiative designed to be an incentive to get mailers using the IMb system had essentially become a loan, because mailers would have to pay for their upfront credit in higher postage rates under the changed price cap.

Mailing industry group PostCom suggested that depending on how the price cap changes were implemented by USPS, it could even leave some mailers worse off.

Direct mail giant Valpak pointed out that USPS already has an incentive in place for mailers to use the IMb system – the fact that from January 2014, mailers will have to use Full Service IMb in order to claim discounts available for mail sorted to automation standards.

Losses

USPS issued its latest financial results to regulators this week showing that for the month of May, it made a $202m loss, $135m of which came from operations rather than its contentious healthcare funding arrangements.

The results showed progress being made, with operational losses less than half those seen in May 2012.

In the financial year to date – starting October 2012 – the Postal Service has made a $3.84bn loss, but states that its “controllable” operations have only accounted for a $267m loss. This compares to a $10bn overall loss and “4616m “controllable” loss recorded for the same period last year.

USPS needs Congress to make changes to its healthcare funding arrangements in order to turn around the losses outside its “controllable” losses. National legislators are currently working on potential reform proposals to help.

The Postal Service has already reached the end of its $15bn line of credit with the federal government, and will be running on fumes until October when the Christmas peak brings fresh liquidity.

Source: Post&Parcel/PRC

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