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White Papers

Aug
31
2015
Report Number:
MS-WP-15-003
Report Type:
White Papers
Category: Retail, Sales & Marketing

Mail Service Providers

Executive Summary

The U.S. Postal Service is at the core of a domestic mailing industry that is worth more than $1.3 trillion and touches millions of people and businesses. While most of its customers primarily rely on the Postal Service for mail delivery, some are also business partners. These include paper companies that provide mailing materials, catalog designers, logistics companies, and many other businesses critical to the mailing industry.

This paper explores the relationship between the Postal Service and a related industry group called mail service providers (MSP). MSPs perform mailing-related services for companies or organizations interested in using the mail to reach their customers. Specific MSP services include designing, printing, transporting, or otherwise preparing mailings to qualify for Postal Service postage discounts (“worksharing”). MSPs can be an efficient and cost-effective option for organizations that have limited expertise in navigating complex Postal Service business mailing requirements. MSPs can help these organizations use the mail for effective marketing, advertising, and general communication.

MSPs have existed since the first product catalogs were mailed in the early 20th Century. The Postal Service’s systems recognized about 3,900 MSPs in fiscal year (FY) 2014. These MSPs represent companies that apply for business mailer status by submitting a Postal Service Form 3615, Mailing Permit Application and Customer Profile; paying a one-time nonrefundable fee; and submitting mailings directly to the Postal Service. The Postal Service reported over $29 billion in revenue associated with these MSPs in FY 2014 — about 43 percent of its total revenue ($67 billion). MSPs sent about 102 billion mailpieces in FY 2014, which was about 65 percent of the Postal Service’s total mail volume (155 billion pieces).

Our objective was to describe the role of MSPs in the U.S. mail system. To that end, we researched MSPs and industry trends, analyzed MSPs’ volume and revenue information from various Postal Service systems, observed operations and interviewed staff at large and small MSPs, interviewed Postal Service staff, surveyed MSPs, and reviewed information from the Postal Regulatory Commission and prior U.S. Postal Service Office of Inspector General reports. 

MSPs play an important role in the mailing industry by performing key mailing-related functions for large and small mailers, particularly related to encouraging new entrants to use mail. MSPs use various Postal Service products and services and account for a major portion of the Postal Service’s annual volume and revenue. The Postal Service’s relationship with MSPs is complex, as MSPs have characteristics of customers, competitors, operational partners, and mailing supporters. MSPs also sometimes use Postal Service worksharing discounts, but these discounts are the source of much debate in the postal industry. Specifically, there is controversy over the types and amounts of discounts, as well as whether there is an imbalance between certain discounts and the actual avoided costs. This controversy is likely to continue as technology advances, Postal Service and mailer operations and processes evolve, and workshare volumes continue to grow. It will be critical to protect the Postal Service’s.

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