Rising Postage Rates, Service Cuts Open Door For Alternative Distribution Services

In response to ever-increasing postage rates and service cuts from the U.S. Postal Service, some publishers are considering alternative distribution services.

As reported recently in Postcom.org, The Economist is experimenting with hand-delivery in the Washington D.C. suburbs. Southwest Distribution Inc., which distributes The Economist throughout the Washington D.C. metro area, confirms the move comes principally in response to the proposed elimination of Saturday mail delivery.

Courtney Northrop, an executive officer at Southwest Distribution Inc., says the number of magazines utilizing their service actually declined a few years ago in response to growing Internet readership, but has lately risen due to concerns about Postal Service rates and service cuts. “Our rates are cheaper than postal rates by far,” he says.

Alan Robinson, president of consulting firm Direct Communications Group and author of the Courier, Express, and Postal Observer blog, says hand delivery makes sense for magazines targeting upscale readers in suburban areas and could also work more broadly in urban areas.

“It’s a combination of keeping costs down and providing service to high-income readers,” he says. “My sense is [The Economist is] testing this. They have a Saturday deadline [for delivery] and for these high-income audiences, if the service is not attractive, people will move to an alternative.”

Unlike the Postal Service, Southwest Distribution is open “24 hours, all year round,” Northrop says.

Another example cited by Robinson is media and marketing services company Valassis expanding its use of alternative delivery services. He reports Donnelly Distribution Service, a Philadelphia area firm, is adding suburban Delaware County, Pa. to its delivery area, and deliverer Power Point is expanding into the Las Vegas market. “Both of these companies provide services that effectively compete on a price and service basis with the rates the Postal Service charges for saturation flats,” he says.

Mike Donnelly, general manager at Donnelly Distribution, says an Economist-style hand delivery service for magazine subscribers could be an expensive proposition. “It becomes like a paper route, whereas we swarm everything. We do [retail] circulars.”

Newspaper publishers able to bundle a magazine subscription into existing newspaper deliveries may see opportunities for taking delivery revenue away from the USPS, however. The Washington Post Company recently announced it would be launching a paid subscription magazine, Capital Business, to be delivered to subscribers along with the Monday edition of the Post. “The move suggests that the country’s newspaper industry may be ready to try a new twist on a strategy that failed in the 1990s — competing with the Postal Service to provide home delivery of magazines,” publishing industry blog Deadtree Edition reported in March.

According to Deadtree Edition, the earlier effort to deliver magazines on paper routes failed because the Postal Service at the time lowered postage costs by restructuring rates to encourage dropshipping. With current calls to jack up periodicals rates to cover the USPS’s high overhead, such a strategy by newspapers could prove more successful this time around.

Northrup says The Washington Post Company is already his “largest competitor” in the D.C. metro area for periodicals delivery, bundling The Financial Times, Barrons, The Wall Street Journal and Investors Business Daily in with The Washington Post.

Publish date: May 7, 2010 https://dev.adweek.com/media/rising-postage-rates-service-cuts-open-door-for-alternative-distribution-services/ © 2020 Adweek, LLC. - All Rights Reserved and NOT FOR REPRINT