Co-Palletization: Rising Postal Rates May Push B-to-B Publishers to Bulk Up

Folio: The Magazine for Magazine Management, June 1, 2004 by Anthony DeRico

Byline: Anthony DeRico

Faced with the specter of rising rates from the United States Postal Service and pressure from their consumer cousins to make periodical mailings more efficient, business-to-business publishers are currently reexamining their mailing strategies. The reason: Co-palletization.

Co-palletization allows publishers to shrink-wrap thousands of magazines being mailed to particular ZIP codes. This bundling of magazines from different publishers cuts down on handling costs and publishers who co-palletize benefit from a USPS work-sharing discount.

Essentially, co-palletization has only worked for publications with circulations greater than 200,000. Huge publishers such as Time Inc. and Hearst have used the strategy to cut their mailing costs. To make co-palletization more palatable to smaller publishers, particularly b-to-b, printers such as RR Donnelly & Sons, Quad Graphics and Brown Printing have applied technology to sell a process called co-mailing. Co-mailing allows publishers that have periodicals with circulations of 15,000-20,000 to ship multiple magazines on one pallet in order to reach a large enough number (roughly 75,000-85,000 pieces) to take advantage of the work-sharing discount.

SHORT SHELF LIFE

The only drawback is that co-mailing palettes go out monthly, which requires a tightly disciplined production schedule. "If you miss the shipment you have to wait until the next month," says Jeanette Ray, director of solution development at RR Donnelly. But this delay isn't the only reason that b-to-b publishers are still using the old mail sacks. "B-to-b publishers are capable of creating and sticking to a production schedule," says Jerry Okabe, vice president of audience marketing at Primedia Business Magazines & Media (parent company of Folio:). "However, if the choice for a publisher is to save $1,000 in postage or delay production to sell three ads for $25,000, the incentive is not yet there." Okabe also sees a logistics problem. "B-to-b information has a short shelf life so as soon as a periodical is done, publishers want it out the door, while another publication may want to wait on a breaking story or advertisement. Then co-pallet production becomes a nightmare."

PROVIDING INCENTIVES.

In the next few years, b-to-b publishers will have no choice but to move to bulk if postal rates continue rising. But big bulk mailers like Time are trying to force them to do so sooner. That's because the USPS currently lumps all mail from sacks and pallets together and takes the discount off the whole, forcing the bigger publishers to subsidize the smaller ones. "We shouldn't have to shoulder the burden of inefficient mailers," says Time Inc.'s director of distribution and postal affairs, James O'Brien. In order to get small publishers to go along, last January Time Warner filed with the Postal Rate Commission proposing rate hikes for publishers that continue to mail in sacks. Time Warner was joined by other consumer publishers such as Conde Nast, Newsweek, Reader's Digest and TV Guide. "Publishers will not change unless they have an incentive," says O'Brien. "We want to build the right rate structure so both large and small publishers will work toward co-palletization."

That's easier said than done, according to American Business Media's (ABM) postal counsel David Straus. It might be true that the move to co-palletization is inevitable but many b-to-b publishers want time to determine appropriate production schedules with printers to ensure no publisher is left behind, says Straus. "Guys like Time Warner have been doing this for years." ABM wants to protect weekly periodicals that have tight production turnarounds from sack mail surcharges and ensure that the rate structure doesn't move faster than many b-to-b publishers can handle. "It's easy for a 1 million-plus circulation Sports Illustrated to demonstrate efficiencies of scale," says Okabe. "It's another thing for a b-to-b publisher with a handful of titles with controlled circulations of 20,000 each to do the same thing." Still, it's no longer a question of whether co-palletization will apply to b-to-b publishers, but when.