Postal Increases Deliver a Crushing Blow for Some Small Busnesses
For small business exports, U.S. postal changes may mean the end of an era. The cash-strapped postal service receives no tax dollar funding from U.S. taxpayers and is facing unprecedented Congressional requirements to fully fund its $11 billion employee pension.
The latest round of postal increases went into effect January 27, 2013 and included:
· $.01 for first class postage to $.46
· $.01 for postcards to $.33
· International destinations (1 oz) $1.10
New domestic retail pricing for Priority Mail saw an increase of 6.3 percent :
· Small Box - $5.80
· Medium Box - $12.35
· Large Box - $16.85
· Large APO/FPO - $14,85
· Regular Envelope - $5.60
· Legal Envelope - $5.75
· Padded Envelope - $5.95
Beginning in 2013 – Global Forever Stamp will cover first-class mail to anywhere in the world for $1.10 (1 oz).
In a report on National Public Radio’s Morning Edition, reporter Sami Yenigun relays the story of postal increases not just on the American consumer, but on the small business exporter, particularly the small record label. Costs for shipping product from the manufacturer, printer, and even printing and shipping the paper sleeve to the actual distribution to shops and consumers, the total cost of mailing has become cost-prohibitive for the small business exporter.
Indie record labels aren’t the only ones feeling the International postal rate hike pinch. Small business clothing designers and retailers are also feeling the sting in the cost of importing materials and exporting of finished products to international clients and customers. Pushed into the free shipping boom of the last several years, online retailers are now absorbing the cost of shipping increases or reneging on free shipping programs for alternative offers of online discounts instead. While consumers realize that postage has a cost, for many it is far more attractive to purchase from a business offering free shipping rather than paying for shipping and receiving a percentage discount. According to Greg Kerr, owner of Miles to Go, an online clothing design company, “Now that it costs me $13 to mail a medium shirt to the UK and $10 to Canada, I can’t take that huge a hit.” Kerr is looking to try other discount incentives instead of free shipping offers for his unique designs and hopes that his younger customers will stay with him even though he knows that their struggling financially.
Small business owners have recommended some very creative work-arounds to rising postal costs.
1. Ship larger, minimum purchase amounts to distributors and overseas retailers to hold until the consumer places and order, thereby reducing the overall cost of distribution. Then the distributor in say, London, England can send out the one or two item order without incurring such high international postage rates. The downside is that International distributors will need more working capital to make larger ‘minimum’ purchases and will need to hold it in their inventory longer.
2. Rather than printing and mailing incentives and coupons directly to customers, consider online couponing and mobile coupons as a viable alternative. This method is especially effective for younger demographics who are never more than a few feet from their smartphones and iPads and use this form of buying as part of their daily routine.
3. The USPS still offers its Every Door Direct Mail service, which allows mailing of business materials to literally every address within a specific zip code(s). For many small businesses, this locally driven marketing tool is a great way to reach out and inform potential customers about special offers, new menu options and events at your business. To learn more, the USPS offers classes at local post offices. Check your local post office for details and class times.
4. Plan ahead for postal changes by building alternative distribution options. Some businesses have turned to electronic tools such as online bill paying, self-service ordering and utilizing websites, email and even social media to stay in contact with customers.
5. Seek out value-added alternatives such as bar-code tracking to keep a watchful eye on product deliveries throughout the shipping process. For many businesses using third party distribution systems, that means moving away from USPS services to FedEx and UPS.
Beezer Molton, founder and president of Half Moon Outfitters, a retail chain in the Southeast says that “increased rates for USPS will negatively affect business, since the post office’s priority mail has become the standard for many free shipping offers.” Rate increases and the USPS’s inability to stay current with bar code tracking systems are leaving small business owners feeling the pinch not just financially but also from customers who demand a higher level of service. “Higher prices, combined with the fact that USPS has little recourse in the tracking of lost packages may end up killing them as a viable alternative,” he continues in a CNBC story.
As with many changes in economic forces, small businessses are always learning to do more with less. By staying in close contact with your small business bookkeeper, accountant or tax advisor, you'll be in a better position to take advantage of opportunities and make quick course corrections when unexpected financial changes impact your operations.
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Please be advised that, based on current IRS rules and standards, any advice contained herein is not intended to be used, nor can it be used, for the avoidance of any tax penalty that the IRS may assess related to this matter. Any information contained in this article, whether viewed or subsequently printed, cannot be relied upon as qualified tax and accounting advice. Any information contained in this article does not fall under the guidelines of IRS Circular 230.
Copyright Information 2013 Professional Association of Small Business Accountants