According to the latest Census information, there are roughly 27 million businesses in the United States. We want to look at what is changing around how they mail and communicate with their communities. The goal is not to look at the largest credit card and insurance companies, but at how the rest of the business community is changing their mailing habits.
We all read the news that talks about the huge declines in mail, but I want to break it down to the areas that impact businesses. I have a unique perspective on this because I have managed thousands of clients across all industries and have had national visibility to volume data that shows how businesses mail.
Let’s start by looking at the postal volumes by class of service. The main reason that the USPS is in financial trouble is because of the decline in First Class Mail, which is their main revenue driver. We mail 32% fewer First Class pieces than we did in 2008. This is happening because people are moving to electronic forms of communications. Let’s dissect the main areas of business mail to look at these changes:
- Invoices and Statements – This is by far the largest first class mail generator because all businesses need to get paid. These pieces have to be sent out as First Class because of their personalized nature. Here are the biggest changes:
- More going online – As a society, we are getting more comfortable opening these documents online and tablet and smartphone adoption is at over 50% of the population.
- Consolidating Print – Many companies are getting smarter about what they are sending, allowing them to mail less. This could be consolidating invoices going to the same location, suppressing low value balances, and printing from centralized locations.
- Checks – This was typically the second biggest First Class mailing because of Accounts Payable and Payroll checks.
- Accounts Payable – Just like all of us who have moved to pay our personal bills online, so have many companies. Also, many AP departments have done a better job at consolidating multiple payments to the same vendor on one check, further reducing volumes.
- Payroll– We used to all get paychecks, and then we moved to direct deposit but still got the remittance stub mailed. Today, many employers expect you to access that information online eliminating the majority from being mailed.
- Marketing Mailings – Many companies used to send mailings First Class, but have outsourced these to mail houses that can do them more efficiently and at lower cost as Standard Mail. The reduction in postage by switching service levels helps pay for the fees and the work is left to the professions.
- Day to Day Correspondence – This is the majority of what is left and it is typically items that need the personal touch of being mailed or requires a signature on a document. This area is decreasing because of our comfort level with PDF formatting that can maintain the documents integrity when opened through email.
To further prove this point about the changes in business mail, we can look at the Postage Meter Market over the same time period. The majority of mail run on Postage Meters is First Class and there has been a 21% decline in meter units over the last five years.
The bigger indicators are the shift in meter segments typically defined by the machine speed. The Commercial Segment (Automatic Feed machines that run at the highest speeds) has seen a 67% decline. This is because many of the institutions like banks, insurance companies, manufacturers, colleges, and nonprofits etc. , had decreases in volume that no longer predicated they had this level of equipment. Mid-range meters had a 24% growth because these units had similar features allowing many from the Commercial segment to downgrade. The big issue is that commercial meter segment represents 65% of all metered mail revenue compared to 11% for the Mid-range. As the Commercial group continues to shrink, it will have huge consequences to future mail volumes.
The next big change is a 25% decline in the Small segment defined as convenience postage meters. This is because many businesses find that they do not use them enough to justify their cost or they have switched to PC Postage.
PC Postage is where you can generate stamps through a program loaded onto your computer or from a website. From the numbers, there are now over one million PC postage users, but it still only makes up 12% of the Postage Technology revenue. This number is also disproportional because many PC postage users are heavy shippers vs. first class letter mailers and will have higher postage spends because of larger per piece costs.
Although Standard Mail has seen a 24% drop in volume, most occurred at the start of the financial downturn and levels are holding much steadier than we saw in First Class. Businesses still need to advertise products and services to get customers and the mail is still a very effective media channel. Here are some of the trends that we see:
- Using Professionals – We used to see more businesses doing marketing mailings in their offices. They would purchase the equipment to do the work and have teams of people get together to help get the projects out the door. With the amount of printers and mail houses, many businesses have left the work to the professionals who can get lower postage rates and manage the changing USPS requirements like Intelligent Mail Barcodes and Folded Self Mailer.
- Converting to Email – Businesses have moved many communications they were mailing to email because of the cost, simplicity and immediate feedback it can provide. Newsletters, surveys and special offers that can now be generated in minutes for less than $.01 each.
- Using Print to Drive Digital –Frequently we see mailings with QR Codes and Augmented Reality as part of a multi-channel campaign where they can drive people to specific web content.
- Higher Personalization – Businesses are getting smarter about the segmentation and personalization inside their offers to achieve better return on investments. This may mean sending fewer higher impact pieces.
The biggest bright spot is Every Door Direct Mail that offers a very simple approach to generate projects without an address list and with very little cost and effort. The goal is to get businesses mailing who may not have been doing it in the past. It allows the local insurance agent to send out a mailing to all of the residents in a specific city, or block that they can target from the USPS website. It has been met with huge success and I anticipate further enhancements and offerings.
Another bright spot for the USPS is around their growth in the shipping markets where they compete head to head with UPS and FEDEX. To start with, the USPS has the best last mile delivery network in the country and will even deliver many of the residential shipments for the private carriers. The reason for their growth in shipping services is that they have the lowest rates for light weight residential shipments. The private carriers charge residential fees and surcharges as well as have minimum service rates that can make the USPS less expensive. We are all ordering more products online and successful shippers understand how to maximize the carriers to select the lowest rates.
Mailers who do a lot of international will typically use a consolidation service that will process pieces at a discount. These consolidators may use the USPS through their per-pound rate structures or drop ship it right into that countries postal system, bypassing the USPS entirely. There are three types of mailers who make up the bulk of the international spend:
- Marketing/Periodical Mailers – Businesses with a set mailing list and are sending large projects in bulk. This makes up the majority of international mail from businesses. This group is declining as more people access content online.
- Shippers – Businesses sending e-commerce packages outside of the US. This is a growing group because different providers are now offering ways to estimate custom duties upfront at the time of order. This group will increase as we all want to compare prices of buying products from different countries.
- Miscellanies Mailers – This is the university or financial institution that has clients abroad and needs to send correspondence. From my experience, businesses spending over $15,000 per year in miscellanies international mail will be using a service. This group is declining rapidly as more mailers look for electronic ways for delivery.
I do not think I need to tell you that the periodical market is in a tough spot. How many newspapers and magazines have folded, consolidated or are putting more emphasis in their online versions. Many people now prefer to get their news on a tablet or smartphone as it is happening vs. waiting for the printed copy. As tablets become less expensive and people get more comfortable with the technology, along with our increased focus on the environment, we should see drastic shifts to consuming this content online, further reducing printed Periodicals.
I am sure that most of this information is not new, but hopefully in a format that dissects how the business community in the US mails today and the trends that we can expect to see for the future. Mail is by no means going away but it is inevitable that we will see less First Class and Periodical Mail with higher emphases on advertising and shipments. The big question is how the USPS will adapt to these changes and work within this new reality.