Private mailers offer united front against USPS

Folio: The Magazine for Magazine Management, June 15, 1995 by Tim Bogardus

For publishers trying to combat skyrocketing production and distribution costs, alternate delivery is again gaining notice as a way to bypass the U. S. Postal Service and its everchanging rates and regulations.

At least, that's what the two leading private mail delivery companies - Alternate Postal Delivery (APD) and Publishers Express - were hoping when they joined forces in Las Vegas in mid-May for the first Delivery 2000 conference, an event that brought together the carriers' distribution affiliates to present a unified front in their battle for delivery marketshare.

The two companies are hoping that the much-debated reclassification case currently before the Postal Rate Commission, will serve as an impetus for smaller mailers - who face a rate increase as high as 17 percent - to evaluate alternate delivery. "We've had a flurry of inquiries since the last rate case," notes Melanie Franz, director of customer relations for Grand Rapids, Michigan-based APD.

Recently, APD and Marietta, Georgia-based Publishers Express launched a pool-shipping program to help smaller-circulation titles. The companies contracted with Chas. Levy Transportation Co. to pick up magazines at printing plants, primarily in the Midwest, and bring them to its Michigan City, Indiana, facility, where the titles are sorted and consolidated for shipping to the 65 markets now served by the two carriers. "We've kind of opened the door for small publications," says Rich Rousseau, director of customer relations for Publishers Express.

But "small" for some is big for others. Rousseau concedes that alternate delivery is not yet a viable option for titles with circulations under 200,000, or for those publications with a high percentage of delivery in urban areas, which are not typically part of the two services' daily routes. The smallest-circulation title now delivered by either company is Times Mirror's Yachting, which has an ABC-audited paid readership of 133,000. "If someone came to us and said, 'I have 10 copies to be delivered,' we would do it," says Rousseau. "Of course, they may have some fixed costs that offset their savings."

Compared to the Postal Service, which had $55 billion in revenue last year, the alternate-delivery industry is tiny, bringing in an estimated $20 million in 1994. But tiny doesn't mean insignificant: APD and Publishers Express deliver as many as six million magazines every month, including titles from Time Inc., Meredith Corp., Lang Communications, The New York Times Sports/Leisure Group, Times Mirror Magazines, Hachette Filipacchi Magazines, Gruner Jahr USA and the Smithsonian Institute.

Publishers are funding that in addition to savings of 10 to 40 percent on delivery rates, alternate delivery has some other advantages over the USPS - such as the flexibility to offer sample products.

For example, Publishers Express and APD charge a flat rate for each title regardless of weight or ad:edit ratio, with prices varying by volume and individual contracts. Although the two companies do charge for polybagging sample products, there are few restrictions on what can be included in the bag. This service has attracted consumer magazines - such as Hachette's Woman's Day and G J's McCall's - that create ad packages using samples and other marketing vehicles. Alternate delivery also provides the ability to designate delivery days and to target specific neighborhoods.

And the drawbacks? Because APD and Publishers Express use local newspapers as their main affiliates, alternate delivery generally works best for consumer magazines in residential and suburban areas where the papers are delivered. The two carriers do not have access to mailboxes, so magazines are delivered to doorsteps and driveways and hung on doorknobs - a practice that in the past has led to complaints from those readers who don't want their magazines sitting out in the rain or accumulating while they're away on vacation.

Will the big players stay?

Ironically, it is possible that reclassification could create an environment in which large-circulation titles pull out of alternate delivery because of the savings (as high as 14 percent) that the postal restructuring would offer. But Rousseau says he doesn't think it will happen.

"Because we base our rates on postal rates," he explains, "I would be surprised if any of our big customers pull out because of reclassification." Publishers Express' largest clients are also owners/partners in the carrier. Time Inc. founded the company in 1989 and serves as managing partner. Among the other partners are Meredith, R. R. Donnelley & Sons, Times Mirror and Quebecor Printing. Alternate Postal Delivery's investors include Scripps Howard, Capital Cities/ABC and the Tribune Company.

"We're not running scared from [reclassification]," says APD's Franz. The USPS is slated to file another general rate case in 1997. As Franz notes, a 17 percent hike for small publishers in 1996 and another increase the next year could open a lot more doors to alternate delivery.