Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, February 1, 1991 TAG: 9102010222
SECTION: BUSINESS PAGE: B4 EDITION: METRO
SOURCE: GEORGE KEGLEY BUSINESS EDITOR
DATELINE: LENGTH: Long
Impacts of the higher postal rates will be compounded later this month when United Parcel Service also raises its rates.
Regional companies said Thursday they are looking for ways to pass the higher costs along to customers without losing business, already weakened by the recession.
Both increases "are very inflationary," said John Moticha, vice president of operations in Roanoke for Orvis, a mail-order retailer. The UPS increase, effective Feb. 18, is the hardest of the two, he added.
Orvis will use computers to decide the best way to send mail and packages, Moticha said.
"Nothing is free. Any inflationary increase has to be absorbed or passed along to the customers," he said.
Among other Virginia volume mailers, C&P Telephone Co. estimated its mailing expenses will jump $4.2 million this year as a result of the higher postage rates. Dominion Bank's postage probably will rise about $1 million. Appalachian Power Co. said Thursday it expects to pay $400,000 more and Roanoke Gas Co. will have $37,000 in additional mailing costs.
Direct-mail catalog operations such as Tweeds, Orvis and Direct Marketing of Virginia are among Roanoke Valley firms likely to take the hardest blows. That's because United Parcel Service is raising its rates by as much as 16.1 percent soon after the U.S Postal Service implements its increases.
Parcel post used to be much more expensive, Moticha said, but the UPS changes "will close the gap in lower weights and closer zones."
Alan Caminiti, a UPS spokesman at the company's Connecticut headquarters, said Thursday that business-to-business rates will go up 3.2 percent, rates for delivery to residences will rise 16.1 percent and next-day air service will be 9.9 percent more.
UPS is raising its rates because of additional fuel payments of $1 million a day, "a very expensive Teamsters Union contract" and other increasing costs, Caminiti said. "The rates reflect expenses and a reasonable profit," he said.
Besides going from 25 cents to 29 cents for a first-class stamp, the postal service is increasing the cost of post cards from 15 cents to 19 cents. The express-mail letter rate will go from $8.75 to $9.95 and overseas postage will rise from 45 cents to 50 cents for the first half-ounce.
Third-class rates for business bulk mail and junk mail will go up by 25 percent. "We're really against that," said Eloise Miller, public information officer at the Roanoke Post Office. Bulk mailers should absorb that, she said.
Mail to military men and women stationed in the Persian Gulf for Operation Desert Storm will remain at the domestic rate, going to 29 cents.
Richard Wells, publisher of the Roanoker and Blue Ridge Country magazines, said his company will absorb the 23 percent increase. The cost of mailing the magazines is not a major factor like printing or production, he said.
Of greater impact will be the higher costs of sending direct-mail advertising and promotions, he said.
Wells said he invested $100,000 in mailing a quarter-million promotional pieces for Blue Ridge Country this week. He has delayed the mailing two weeks in hope of avoiding the adverse impact of Persian Gulf war news. But if the mailing had not been sent before Sunday's rate increase, Wells said, he faced paying an additional $6,000.
Dominion Bank's postage is expected to go up at least 16 percent. If the bank's business grows by 4 percent, Dominion faces a 20 percent increase in postage costs this year, said Brenda McDaniel, a vice president. The bank's postage expense was $5.7 million in 1989, according to its most recent annual report.
The additional $37,000 expense expected by Roanoke Gas is not included in the utility's current rate-increase request but it will be in the next one, said Roger Baumgardner, vice president.
The higher mailing and shipping costs have been a hot topic among mail-order executives, who reportedly came away from a recent meeting with UPS saying the higher shipping and mailing rates "threaten extinction for many catalog firms and will devour the profits of many others," according to DM News, a direct-marketing trade publication.
The catalog executives were talking about the possibility of using other companies that ship at lower costs.
Ted Pamperin, Tweeds president, said companies such as Federal Express, Emory and Roadway Package Service "may be poised for the opportunity," DM News said. The publication estimated that UPS handles more than 90 percent of catalog shipments.
Perk Perkins, mail-order president of Orvis at its Vermont headquarters, wrote UPS that "price increases are a way of life, but yours seems so ill-conceived and disproportionate with economic reality that you have lost the loyalty and confidence of this customer," according to DM News.
Bob Yobaggy, a Roanoke consultant to direct-mail companies, said stronger firms will mail less and marginal companies won't make it as a result of higher postage and shipping rates. Mail-order customers are very sensitive to price changes and it is hard for them to add to the cost of a product, he said.
Yobaggy predicted that some mail-order companies will add new products at higher prices, some will shrink and others will offer cheaper catalogs to weather the shipping increases.
by CNB