Mainstream Media Miss: Postal Service Will NOT Sell Clothing

Contrary to many recent news reports, the U.S. Postal Service has no plans to get into the clothing business, a USPS official confirmed today.

Even reputable news organizations botched the announcement last Tuesday that the Postal Service has entered into a licensing agreement allowing a clothing company to sell the “Rain Heat & Snow brand of apparel and accessory products.”

“Strapped for cash and obviously desperate, the United States Postal Service is launching a new line of ‘smart apparel' — also known as wearable electronics," wrote The Atlantic, which also said USPS would "get into the outdoor gear business."

“The federal government's mail transport and delivery agency this week said it will roll out a line of apparel and accessories it plans to sell in department and specialty stores,” wrote Reuters, also confusing the words “licensing” and “selling”. Other reports (including commentaries from The Washington Times and the Boston Herald) completely missed the mark, questioning how the Postal Service could compete with private-enterprise apparel companies.

USPS quietly took down the press release from its web site a day or two after issuing it (I have reproduced it below), then issued the following statement to Dead Tree Edition today in response to a query:

Today's USPS statement
“To clarify a press release issued recently, the Postal Service is not entering
the apparel business. For a royalty, the Postal Service is licensing the words ‘Rain, Heat & Snow’ and other Postal Service trademarks for commercial use by a clothing manufacturer. By agreement, the manufacturer will be able to use these words and trademarks on clothing or clothing labels, and in advertisements, in ways approved by the Postal Service. Other than this licensing agreement, the Postal Service has no relationship with the manufacturer. The Postal Service receives no tax dollars for operating expenses and relies on the sale of postage, products and services to fund its operations.”

In other words, the Rain Heat & Snow brand will not put USPS into the clothing business any more than Tesla bragging about being the Motor Trend Car of the Year makes Source Interlink (publisher of Motor Trend) a car company. Or any more than having so many brands using the Good Housekeeping Seal of approval makes Hearst a  purveyor of consumer products.

Or any more than publishing an ad disguised as an article defending the Church of Scientology puts The Atlantic into the religion business. (Oh, did I touch a raw nerve?)

It’s times like this that make me ashamed to say I work in the U.S. publishing industry. Nowhere does the original USPS press release say anything about the agency making or selling clothes. The press release’s headline is somewhat misleading, but the press release’s text makes clear that the deal is a licensing agreement, pure and simple.

As with other licensing agreements, the licensee (The Wahconah Group) bears all the costs and risks, while the brand owner (USPS) gets a share of the proceeds. Financially, there is no downside for the Postal Service.

Here, for the record, is the query I submitted to USPS spokesman Roy A. Betts last night that prompted today's USPS statement: “You were listed as the media contact on the Feb. 19 press release headlined 'U.S. Postal Service to Introduce New Product Line' and were quoted by some news organizations on the subject. Can you explain why the news release has been taken down from the Postal Service's web site? Also, can you confirm that this is merely a licensing agreement for the Postal Service, where it would benefit from sales of the clothing but would not bear any such costs as manufacturing or marketing? I ask because some coverage of the announcement suggested that the Postal Service was competing with private industry or that it could lose money on the venture.”

If a semi-professional “blogger in his pajamas” grasped what the Postal Service’s news release meant, how come so many real reporters and editors in the mainstream media couldn’t get the story right?

Judge for yourself; here’s the original USPS news release:

U.S. Postal Service to Introduce New Product Line 
Licensing Agreement Signed with Fashion Apparel Company 
February 19, 2013 
Release No. 13-026 
WASHINGTON— Neither snow, nor rain nor gloom of night has taken on a different meaning at the U.S. Postal Service with plans to launch a new product line of apparel and accessories under the brand name, “Rain Heat & Snow.”

The Postal Service’s unofficial motto, “Neither snow nor rain nor heat nor gloom of night stay these couriers from the swift completion of their appointed rounds,” serves as a backdrop for a licensing agreement the organization has signed with Cleveland-based fashion apparel company Wahconah Group, Inc. The agreement leverages Postal Service intellectual property by introducing the Rain Heat & Snow brand of apparel and accessory products.

“This agreement will put the Postal Service on the cutting edge of functional fashion,” said Postal Service Corporate Licensing Manager Steven Mills. “The main focus will be to produce Rain Heat & Snow apparel and accessories using technology to create ‘smart apparel’ — also known as wearable electronics.”

“The Wahconah Group is excited to be working with the U.S. Postal Service in launching this all-weather line of clothing,” said Chief Executive Officer Isaac Crawford. “The products will build on the rich American history of this iconic brand, creating specialized apparel for consumers, at affordable prices, delivering something new and exciting that retailers can offer their customers.”

Wahconah Group, Inc. is a minority-owned company based in Cleveland, OH, with extensive experience in the fashion apparel industry. The firm designs, sources, manufactures and sells apparel with a focus on the men’s apparel market. The company is establishing a showroom in the garment district of New York City to showcase their apparel lines to the fashion industry.

Under the licensing agreement with the Postal Service, Wahconah will initially introduce Rain Heat & Snow apparel and accessories for men with future plans for a women’s line. The goal is to sell this product in premier department and specialty stores..

The Postal Service receives no tax dollars for operating expenses, and relies on the sale of postage, products and services to fund its operations. 

Other examples of Dead Tree Edition taking on the Mainstream Media include:

• On USPS Privatization, George Will Strikes Out  
• News Media and Congress Are Confused About Black Liquor Subsidies  
• How the Postal Service Subsidizes The Wall Street Journal -- and Why It Should Stop  
• My Heartfelt Apology to the Publishing Industry

Read More

My Heartfelt Apology to the Publishing Industry

Let me offer my deepest apologies to everyone who, like me, works in the magazine publishing industry. I’ve been committing an unpardonable sin without even knowing it.

From time to time when I wasn’t covering my usual obsessions – like the U.S. Postal Circus, black liquor tax credits, and greenwashing – I have actually written about and even opined about our industry, often focusing on major New York publishers. I thought somehow that having worked many years (too many years) in the industry and having the benefit of insights from a host of brilliant and well-informed insiders qualified me to speak about the business occasionally.

But I’ve discovered in the past few days that all wisdom about magazines emanates from the New York publishing elite. And I’ve learned about the unwritten rule that only members of that elite may pontificate about the publishing industry.

Rosie's salute to NY publishing

The revelations started last week with coverage of the proposed Meredith merger/takeover of most Time Inc. publications. Hick that I am, I saw real potential in the move. Meredith, a smart company that uses its strength in publications for women as a springboard into new ventures, would take on Time brands serving a similar audience.

How foolish of me! New York media reporters soon set me straight, pointing out that Meredith is based in Des Moines. Like, Iowa. Like, in the middle of The Flyover (which is how the Beautiful People refer to that cultural wasteland you
have to cross when jetting between the real cities, New York and Los Angeles).
 
Country bumpkin
How could the “country bumpkin” Meredith possibly fathom the sophisticated world of New York publishing, the cognoscenti hinted. After all, publishing breakthroughs like Pathfinder, the conversion of McCall’s to Rosie magazine, and MagHound were certainly not incubated in Des Moines.

Sure, the simple Midwesterners do fine when publishing about gardening, baby care, and potluck supper recipes. But how, the New York media writers hinted, could they ever cover weightier matters like art, fashion, and the Kardashians? Ad Week openly questioned whether low-budget Meredith would be able to maintain the “high-end standards” of some Time-produced titles.

Silly me, I used to think that another heartland publisher, Reiman Publications, had one of the industry's most successful business models.It was doing user-generated content, big time, before the concept even had such a high-fallutin’ name. With its passionate fan base and sophisticated direct-marketing efforts, Reiman made selling books and launching new publications look easy.

But New York publisher Reader's Digest Association saw that Reiman needed to be fixed. (My God, the Reiman magazines didn’t even sell advertising!) And fix it RDA did. RDA bought Reiman in 2002, dropped the respected (in red states, anyway) Reiman name in 2007, went Chapter 11 in 2009, then "Chapter 22" (second time in bankruptcy court) this week.

OPM
Ah, so that’s the sophisticated New York way of making money in publishing: Forget about giving readers what they want. Just pump up the perceived value of your company so you can borrow lots of OPM (Other People’s Money), then bail out when reality sets in -- leaving the OP holding the bag. Badda bing, badda boom!

I’m not the only one who needs to apologize. Publishing Executive (Philadelphia, 97.0 miles from the Time-Life Building) had the audacity last week to publish a scathing critique of Time, Inc.’s “half-hearted” digital efforts written by an innovative but geographically challenged publisher, Ron Matejko. Objections to the article poured in faster than a New York minute, reports editor Jim Sturdivant.

“Some readers felt that, being located in Arizona, Matejko was not qualified to comment on the digital strategy of a New York publisher,” Sturdivant writes. The outrage! Some guy from Ari-freakin’-zona dares to think he can grasp the intricacies of New York publishing when he’s probably never had lunch at Elaine’s!

The moral of this story is, to paraphrase Chief Joseph: Judge not a New York publishing executive until you’ve walked a mile in his moccasins – or ridden 10 miles in his limousine.

For further reading, here are Seven Sins (commentaries on New York publishing) of Dead Tree Edition:

• How the Postal Service Subsidizes The Wall Street Journal -- and Why It Should Stop
• 2 Major Magazine Publishers Reportedly Join Forces To Buy Paper: Time Inc. and Meredith supposedly started an alliance more than three years ago.  
• 8 Questions About Newsweek's Future 
• 9 Differences Between a School System and a Publishing Company: Lessons for Cathie Black 
• Harper's Bizarre: Attacked by Pterodactyls?
• I Got "mine", But I Don't Get It 
• Here's Why We Avoid Four-Color Body Type

Read More

Affordable Postage A Key To Printing Industry's Future, Quadracci Says

U.S. printing prices have failed to keep pace with inflation during the past 25 years, the CEO of the country’s second largest printing company told a Senate panel this week.

“During that same time period, the price of postage has continued to increase and as a result the single largest expense of printing is now the postage associated with delivering the final product,” Joel Quadracci, Chairman, President & CEO of Quad/Graphics Inc., testified Wednesday during a Senate hearing on the “Crisis Facing the U.S. Postal Service.”

“Over the last 25 years, through technological advances and process changes resulting in productivity gains of more than 4% annually, the printing industry has been able to actually reduce the price for printing (adjusted for inflation),” Quadracci said. “The Postal Service should address its problems by achieving the same cost control success,” but instead it is saddled with “extreme excess costs.”

“If the Postal Service can manage its costs and maintain an affordable pricing structure, its business can remain sustainable and ours, in turn along with it.”

“There are three main components to printing a magazine, catalog, retail insert or direct mail piece: the cost of the physical printing of the item, paper and postage. It may be tempting to address the Postal Service’s financial situation by simply raising postage rates to “cover the costs,” but I cannot stress enough how damaging postal rate increases are to our industry,” he told the panel.

“There is a direct negative correlation between rate increases and volume. Our customers demand predictability and affordability and if prices
suddenly increase more than expected they react by reducing their volume to cover the extra postage or move away from print altogether.”

“We are encouraged with the direction we have seen the USPS take over the last year-and-a-half,” Quadracci said, but a number of legislative changes are needed so that the Postal Service can manage its costs more effectively.

Quadracci noted the “tremendous capital expenditure” Quad and other publication printers have made in co-mailing and other “work sharing” activities that save the Postal Service money and earn mailers greater postal discounts. If not for those efforts “to help clients manage their postal costs through work sharing, mail volumes would have been reduced to an even greater extent over the last decade.”

Quadracci did not take a stand on the current hot postal issue – Saturday delivery – but noted the importance of USPS continuing to accept shipments and to process mail on Saturdays.

Read More

USPS Admits FSS Is Losing Money

The U.S. Postal Service acknowledged this week that the Flats Sequencing System has increased the agency's operating costs.

On the same day it very publicly announced the planned cessation of most Saturday delivery, USPS released data confirming what Dead Tree Edition speculated about two weeks ago. (See So Far, FSS Is A Step Backward, USPS Data Indicate.) The data show that two of the three major types of mail processed on FSS machines – Standard (non-carrier-route) Flats and Periodicals – had experienced larger increases in processing costs the past two years than they had gained in delivery savings.

As in the case of the other major category, Standard carrier-route flats, FSS apparently caused the spikes in mail-processing costs, USPS documents added.

 “It appears that in FY 2012, FSS raised costs for these three products as compared with FY 2010 costs,” the agency said in responding to a Postal Regulatory Commission question. But the results don’t mean that the
$1.3-billion investment in the 100 FSS machines was not worthwhile, USPS indicated.

“FSS is a long-term initiative and FY 2012 is only the first fiscal year of full FSS operation,” the Postal Service's response said. “Long-term initiatives often mean additional costs (capital and additional operating costs) have been incurred while the associated savings take longer to realize.”

“Second, the large decline in flats volume has impacted FSS operations, as the lower FSS volume per 5-digit zip code has caused lower FSS productivities than anticipated. Work is underway with Engineering to accommodate the lower volumes, to thereby boost FSS productivity.”

FSS has managed to decrease delivery costs, as intended, by automating “in office” work that used to be done manually by letter carriers. But mail-processing costs have risen far more than the delivery savings have declined for all three types of mail. The USPS answers indicate that FSS is the main culprit.

What USPS officials have not indicated is whether FSS’s negative contribution is primarily from it not yielding as much delivery savings as expected or from it increasing processing costs more than anticipated – or whether they knew all along that FSS would still be a money loser at this point.

In another response to the PRC, the Postal Service also revealed that it processed 3.16 billion pieces, 58% of all flat mail, during calendar year 2012 on FSS machines. Also, the proportion of flat mail not processed on any machine dropped from 45% in 2011 to 27% in 2012.

Read More

The Law Is On Donahoe's Side Regarding Saturday Delivery

Postmaster General Patrick Donahoe confused both the news media and fuming Congress members today with his explanation of why Saturday mail service can be ended without Congressional approval. But he appears to be on solid ground legally. In fact, the case for the U.S. Postal Service making this move was laid out more than three years ago.

Here is Donahoe's somewhat cryptic statement at today's press conference on the legal question: "Is it legal? Yes it is. It is our opinion that the way that the law is set right now with the continuing resolution that we can make this change. The good news is that the continuing resolution that governs the Postal Service that way expires on the 27th of March, so there is plenty of time in there so if there is some disagreement we can get that resolved. I encourage Congress to take any language out that stops us from moving to this five-day mail schedule."

That was interpreted in some circles as meaning that Donahoe was basing his claim on the federal government not currently operating under an approved budget. But some reporters managed in the question-and-answer session to untangle, at least partially, Donahoe's case.

Bloomberg News, for example, reported that Donahoe "said the service decided it can ignore language, first placed in appropriations law in 1981, requiring it to deliver mail six days a week, because it receives its money from Congress differently than other U.S. agencies do."

Rep. Gerald Connolly, an influential Virginia Democrat, accused Donahoe
of "directly violating Public Law 112-74, the Consolidated Appropriations Act of 2012, which states that '6-day delivery and rural delivery of mail shall continue at not less than the 1983 level.'" That quotation, however, takes on a different meaning when read in context.

The law Connolly cites calls for "payment to the Postal Service Fund for revenue forgone on free and reduced rate mail, pursuant to subsections (c) and (d) of section 2401 of title 39, United States Code, $78,153,000, which shall not be available for obligation until October 1, 2012: Provided, That mail for overseas voting and mail for the blind shall continue to be free: Provided further, That 6-day delivery and rural delivery of mail shall continue at not less than the 1983 level."

A small price to pay
What Donahoe was apparently saying today was the same thing the USPS Office of Inspector General pointed out in 2009: The six-day requirement is a condition of the Postal Service receiving a measly $78 million appropriation. If it chooses not to accept the money, it doesn't have to abide by the requirement, as explained by a 2009 article in Dead Tree Edition.

In the words of the OIG report, opting out of the appropriation "would be a small price to pay for cementing the financial independence of the Postal Service and would free it from riders to appropriations acts." (Emphasis added.) Given the Postal Service's estimated savings of $2 billion annually, that would indeed be a small price. (But note that curtailing Saturday delivery is not a question of savings but of additional profit -- that is, cost savings minus lost revenue.)

Congress still has the power to prevent the ending of Saturday delivery (for all but parcels) by passing legislation that specifically requires six-day delivery. But lately Congress hasn't been able to pass much other than the naming of post offices.

Read More

What Happens If the Postal Service Runs Out of Cash?

The U.S. Postal Service’s cash crunch could cause a “catastrophic” disruption of mail service this year, according to a government official who wants USPS to reveal its crisis-management plans.

The Postal Regulatory Commission “should request a description of the Postal Service’s priorities and plans for providing service across the Nation and across classes in the event cash shortages require services to be reduced,” PRC staffer Kenneth E. Richardson told the commission Friday.

“Although the Postal Service survived FY 2012 without running out of cash to operate, continuing operations for a second year at such low cash levels . . . is risky, not only from a financial standpoint, but from the standpoint of potential service disruptions and the impact on mailers,” Richardson, a PRC public representative, wrote.

During four months of FY2013, Richardson noted, USPS projects it will have less than $1 billion of liquidity, which is four days of expenses. If actual results are only slightly below those projections, the Postal Service will lack “sufficient working capital to pay its employees and suppliers,” and “its ability to provide effective and regular postal services will be in jeopardy.”

Slim margin for error
USPS has acknowledged that its “margin for error is slim – a commercial
entity our size would typically have minimum liquidity sources totaling $7 to $10 billion to allow for sufficient variations to plan and to invest.”

Richardson believes that even a temporary disruption of service could be “catastrophic” for customers, employees, and suppliers because “if mail customers cannot rely upon mail delivery and thus flee the Postal Service in short order, most never to return, they would critically reduce the Postal Service’s revenue stream.”

Richardson said the Postal Service’s only statement on the subject is overly vague: “In the event of a projected liquidity shortfall, we will prioritize payments to our employees and suppliers to help ensure that the Postal System continues to operate in a quality manner.”

He fears USPS, in a pinch, would resort to cutting back service more for some customers (presumably the most unprofitable ones) than for others, though such discrimination would be illegal.

Related articles:

• Five-Day Delivery and Reduced USPS Service Standards Could Face Legal Barrier  
• Why Are the Postal Service's Financial Problems Such a Surprise?  
• Would A Lottery Bail Out the Postal Service?  
• How USPS Could Bypass Congress on Saturday Delivery

 

Read More