Postal cutbacks to delay 1st-class mail

[December 06, 2011]  NEW YORK (AP) -- Utility bills are paid, legal briefs are filed and the Christmas shopping all gets done online. But for magazines, clothing catalogues and movies, the mail still matters.

For some mail-dependent businesses, quick and cheap first-class mail service from the U.S. Postal Service is still the best way to reach prospective customers and subscribers. And for many, it's still an important way to get paid.

The Postal Service, which has been losing money for five years, said Monday that it is shuttering more than 200 mail processing centers, adding at least a day's wait for many first-class deliveries. The news was met with concern and frustration from some businesses -- and shrugs from others that long ago stopped relying on the post office.

"It's less of a disaster than it would have been 10 years ago, but it'll be a cash flow crunch for some companies," said Todd McCracken, president and chief executive of the National Small Business Association. "It'll be longer to get your invoice, and longer to get a check back."

First-class mail is supposed to arrive at U.S. homes and businesses in one to three days; about 42 percent of it arrives in one day. The cutbacks will back up deliveries to two to three days; periodicals could take up to nine days.

Cookie Driscoll of Fairfield, Pa., designs and sells decorative animal stickers to gift shops. She uses the Postal Service for almost all deliveries because prices are low and predictable, and delivery is fast. She also receives most of her income by paper checks through the mail.

"The trickle-down effect of this is going to be frustrating," she said. "It's not going to put me out of business but it's an irritant. Every time small businesses turn around we get hit with something else."

The change could represent an operational headache for L.L. Bean, which mails 250 million catalogues a year to sell outdoor clothing and equipment. Now the company knows the day its catalogues will arrive in homes, and it can put on extra staff at call centers on the appointed day. It won't be able to do that anymore.

"We are increasingly concerned about any proposal that would degrade the level of service such as greater variability in delivery deadlines," said Carolyn Beem, an L.L. Bean spokeswoman.

Most Netflix customers who subscribe to the company's DVD-by-mail service watch movies on the weekends and should still be able to return movies Monday and have new ones on Friday, according to Michael Pachter, an analyst at the investment firm Wedbush. But other users will notice a delay, he said.

Netflix -- one of the Postal Service's biggest customers, with expenses of up to $600 million a year -- has repeatedly warned in regulatory filings that any Postal Service cutbacks that delay its DVD-by-mail deliveries will make it more difficult to keep subscribers happy. And, with encouragement from Netflix, customers are already abandoning mail service for movies delivered online.

But for many companies, the changes will have no effect. Some have already stopped relying on the Postal Service, moving online for billing or to overnight companies FedEx Corp. and United Parcel Service Inc. for critical deliveries. First-class mail volume is 78 billion per year, down from a peak of 104 billion in 2001. It is projected to drop by roughly half by 2020.

The health care company Medco said in a statement that it did not expect the postal changes to have a major effect on its business, although the online drug distributor used the Postal Service to send most of its 110 million drug shipments last year.

Keith Ashmus, an attorney at Frantz Ward in Cleveland, said his office can now file pleadings and motions electronically, so it sends far less mail than it used to. Documents served by mail are allowed three days to arrive, which means there will still be enough time for delivery by first class even with the changes.

In some cases, magazine publishers and other bulk mailers who drop off shipments at processing centers that remain open may be able to get their materials delivered the next day.

A spokesman for the MPA-the Association of Magazine Media, a magazine trade group, said the changes may cause printing and transportation problems for weekly publications.

The service changes will almost certainly send more business activity online and to FedEx and UPS.

David Ross, a transportation analyst at investment firm Stifel Nicolaus predicts the new business from postal cutbacks will stem the losses FedEx and UPS saw in overnight document deliveries during the recession.

The 28,000 job cuts announced by the Postal Service likely won't make a big difference to the economy or job market, economists say. Private delivery companies will probably get more business as the Postal Service cuts back.

"It adds to the fear about higher unemployment and inadequate job growth," said Jonathan Basile, an economist at Credit Suisse. But when the cuts are spread over several months, in an economy with about 140 million jobs, there won't be a large impact, he said.

Postal Service employment has been declining for years. The service has cut more than 30,000 jobs in the past year, the government's Friday employment report showed.

Postal Service employment peaked at 909,000 in 1999 and has declined steadily since, falling to 612,400 last month.

[Associated Press; By JONATHAN FAHEY]

Jonathan Fahey can be reached at http://twitter.com/JonathanFahey.

AP Business Writers Samantha Bomkamp in New York, Hope Yen and Christopher S. Rugaber in Washington and Michael Liedtke in San Francisco contributed to this report.

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