June 1, 2021
USPS proposes postage rate increases
The USPS has announced proposed postage rate increases in accordance with Postal Regulatory rules. Under these proposed price changes, the First-Class Forever Stamp price would increase from 55 cents to 58 cents effective Aug. 29, 2021. The price for each additional ounce would remain the same at 20 cents, meaning the Butterfly stamp for non-mailable envelopes would increase from 75 cents to 78 cents. This represents a 5.45% increase in the price of a Forever Stamp, which is less than the average increase for other postage rates.
While increases in stamp prices are never welcome, GCA is pleased that the USPS has departed from its previous policy of raising stamp prices in nickel increments. This was counter-productive and resulted in a reversal of a multi-year growth pattern in mailed greeting cards prior to the last increase from 50 to 55 cents in 2019. GCA is glad the USPS recognized and responded to the concerns we have shared with them in this regard.
USPS 10-Year Plan
There is much that GCA supports in the USPS 10-year “Delivering for America” plan. The commitment to 6- and 7-day mail delivery from an integrated delivery network for mail and packages, support for consensus reform legislation, and optimization of delivery systems to ensure better performance and lower costs are all beneficial, but all that good could be eroded if prices are raised too quickly and in a timeframe to which the industry may be unable to adapt.
The unusual mid-year increase is a cause for concern for the greeting card industry. This timing is questionable given the favorable state of USPS finances compared to its forecasting, and the condition of the mailing industry as it emerges from the pandemic. The difference of a few months to permit the increase to go into effect in the normal January timeframe would cause no harm to the USPS. USPS revenues are running $3+ billion ahead of projections, however this increase could have an unwanted, depressive effect on mail volume from small and large mailers alike. Historic trends suggest that mail volume once lost does not return.
The USPS 10-year plan indicates that it would pursue “judicious and prudent” strategies to optimize revenues. In briefings for the industry, Postmaster General DeJoy has advised that if USPS finances do better than the plan projects, increases would be mitigated since the plan rests on a break-even basis. Again, since the most recent figures indicate that USPS Operating Revenue is $2.4 billion ahead of its projections so far this year, we wonder why there is a need to raise prices now and risk losing volume. It is important to emphasize that revenue is only part of the equation; volume is also a critical because it translates into more future customers for the USPS, and a larger base to cover the institutional costs of the system.
The 10-year plan predicts more than a 40% reduction in mail volume at the end of the 10-year horizon. We believe USPS mail volume can be significantly more than that, and have been and will continue to work with USPS to achieve that, as we were successfully doing prior to the last rate increase. Other members of the mailing industry are also committed to working together effectively with USPS to increase mail volume. We are confident there could be more greeting cards in the mail at the end of 10 years—not just more than a 40% decrease, but more than today, period. We were following that trajectory in the three years prior to the last rate increase, so this is a real goal! Millennials are the key to making that happen, and they have been strongly turning to greeting cards as they buy houses, get married, and have children; the perceived value of sending and receiving a greeting card coming out of the pandemic has never been higher. USPS needs to make sure these Millennials also turn to the Postal Service to mail those cards.
Finally, we are also looking to see if the USPS will take opportunities to improve its services to offset the impact of higher prices and service reductions. Simple changes like increasing the weight limit for a letter and eliminating the surcharge for a square envelope would be a prudent investment in the Single Piece First Class mail product that could increase the value and convenience for card senders within the confines of the 10-year plan. Towards that end, GCA was pleased to see that the additional ounce rate was unchanged at 20 cents. We look forward to working with the USPS to encourage consideration of these opportunities and to continue our cooperation in jointly encouraging the mailing of greeting cards.