Monday, October 2, 2017

USPS Has Good News for Prospective Retirees

The U.S. Postal Service recently made a quiet change that will cause retirement to look sweeter for thousands of postal workers.

Pension estimates the USPS provides to employees who are considering retirement now include an amount for the FERS (Federal Employees Retirement System) supplement, reports Don Cheney, an APWU official with a long history of helping fellow union members understand their retirement benefits. The Postal Service has not announced the change.

“According to the responses I’ve received on Facebook, numerous employees are getting the new FERS annuity estimates with the supplement amount listed,” Cheney says. He provided a sample statement from one employee who would receive more than $15,000 annually – nearly equal to her regular annuity.

“This means FERS employees [those hired after 1983] will finally feel comfortable retiring. The USPS may get a huge exodus,” Cheney predicted. 

The supplement is meant to take the place of Social Security until USPS retirees turn 62, when actual Social Security payments kick in. Usually, a postal worker needs to be at least 55 with 30 years of service to qualify for the supplement. About 85,000 postal workers have 30 or more years of service.

As Dead Tree Edition has reported previously, ignorance of and uncertainty about the FERS supplement have hindered response to USPS early-retirement offers. In a VERA (Voluntary Early Retirement) campaign, the minimum years of service to receive a VERA supplement drops to 20.

That could have been a huge incentive for some employees to retire early -- except that they typically were not told how much the supplement would be, or even if they were eligible, until after they submitted their request to retire.

But the era of big VERAs seems to be over. Instead of having too many employees, the downsized Postal Service now struggles to handle the rising tide of package deliveries while keeping deliveries on time and overtime under control. And there don’t seem to be any major productivity improvements on the horizon that would make it easy to eliminate more positions.

In theory, retirements enable the Postal Service to save money by replacing high-paid career workers with part-timers who gets much lower pay and few benefits. But union contracts limit the number of such non-career employees.

And with the recent trends of low unemployment rates and rising part-time wages, the Postal Service has struggled to recruit and retain non-career workers, especially in markets that have a high cost of living.

“The shortage of clerks and carriers has reached a critical point in almost every post office,” Cheney said. “I expect a massive failure of service standards during the Christmas rush.”

Related articles:


Saturday, August 26, 2017

Postal Service Eyes January Rate Hikes

The U.S. Postal Service is planning to raise virtually all rates a bit in January, apparently including a one-cent hike of the Forever Stamp, to 50 cents. And it’s also hoping it will soon get the power to implement larger rate hikes.

The USPS will raise rates for both market-dominant mail (such as First Class and Marketing Mail) and competitive mail (such as Priority Mail) on Jan. 21, 2018, postal officials told mailing-industry representatives this week.

The average rate increases for market-dominant classes are limited by an inflation-based cap, currently close to 2%. A postal official indicated that rates would rise from 1% to 3% for most market-dominant products, according to attendees at a meeting of the Mailers Technical Advisory Committee.

Postal officials didn’t spell out what any of the new rates would be. But a statement that the increase for letter mail would be about 2% almost certainly means that the price of the popular Forever Stamp for First Class letters will rise from 49 cents to 50 cents (a 2.04% hike).

The new rates for flat Marketing Mail and Periodicals would provide greater incentives to create efficient mailings, which is good news for catalogs and magazines that are co-mailed, as well as for printers that provide co-mail services. But it means higher-than-average rates for small publishers that don’t take advantage of such mail-consolidation programs.

The USPS is most likely to file the new rates with the Postal Regulatory Commission in October. As long as the PRC determines that the USPS proposal meets certain standards, such as not violating the price caps, the new rates will take effect without modification.

Next month, the PRC is slated to announce the results of its 10th anniversary review of the law that created the price cap. If it determines that the law’s system for regulating market-dominant rates is not meeting the law’s objectives, the PRC can modify or replace the system.

Postal officials argue that, because the system fails to meet the objective “to assure adequate revenues . . . to maintain financial stability,” the PRC should loosen or eliminate the price cap. But a significant PRC overhaul of the rate-making rules would probably lead to legal challenges that could delay implementation of any changes.

Related articles:

Thursday, July 20, 2017

Color It Dead: The Coloring Book Bubble Has Burst

Stick a crayon in it: The adult coloring book craze is dead.

Coloring books with grown-up themes were the hot item of 2016 for both brick-and-mortar bookstores and for retail sales of magazines.

Publishers eagerly jumped aboard the bandwagon, cranking out new products in a category that’s well-suited to analog, in-person sales and definitely ill-suited to electronic editions. (Seen a Kindle edition of a coloring book lately?)

Now many stores have grown wary of the category, as sales plummet and inventory stacks up, according to book-industry sources.

Barnes & Noble reported that coloring books were the main reason its Sterling Publishing Co.’s sales grew 22% in the year that ended on April 30, 2016 – and declined 20% during the following nine months.

Recently, B&N management reportedly told its buyers to put the kibosh on bringing in any more adult coloring books, "with rare exceptions." Other retailers are predicting their 2017 book sales will be down versus last year because of the coloring book crash.

Data about sales of adult coloring bookazines distributed via the “newsstand” (magazine retail) system are harder to come by. Magazine publishers were later to the party than book publishers, but many still profited for a while.

The MagNet newsstand-analysis service reported in early 2016 that the category was growing in both titles and unit sales, “with many releases selling over 125,000 copies on the newsstand at higher cover prices.”

But the coloring book trend seems to have cooled off, if not crashed, for magazine publishers as well. No longer does every industry conferences include a speaker telling us that the way to stop the newsstand system from circling the drain is to publish more adult coloring books.

And Cosmo never did publish the Kama Sutra Coloring Book, packaged with a box of 24 different "Flesh Tone" Crayolas, that I was so hoping for.

My friends in the book trade say the Next Big Thing is joke books. Some will say the magazine industry got a jump on that trend with all the special issues about President Trump. (But I, for one, am not laughing.)

Related articles: 

Thursday, June 8, 2017

Books: Amazon's Big Mac

Profit? That's for other products. Amazon gets more important benefits from selling books.

Inside an Amazon Books store: Kindles, Fires, backpacks,
headphones -- oh, hey, there's a couple of books, too.

Despite its dominance of the book business, Amazon probably derives little, if any, direct profit from selling books. But, as demonstrated by its new brick-and-mortar stores, Amazon derives plenty of value from books.

You can’t understand Amazon the book seller – and how to work with or compete against it – by thinking only about books.

For Amazon, books have always been a springboard to bigger and better things. The company was at best a breakeven venture in its early years as a books-only and then books-mostly retailer, and today it still doesn’t have to earn a cent of profit from books to be a successful bookseller., mid-1997. From Geeking with Greg.
Even when started up 22 years ago as an online bookstore, Jeff Bezos’ vision went far beyond books. Or profits: He reportedly didn’t plan to earn a profit for at least four years.

The focus was on growth – acquiring new customers, retaining them with an unmatched shopping experience, and then leveraging that customer base to expand into new types of products.

Books were the perfect way for Amazon to cuts its teeth as an online store. Perhaps no other consumer product offers more SKUs per dollar of sales. Even the largest physical bookstore in the world couldn’t possibly stock anywhere close to all of the books in print.

That left an opening for Amazon that the fledgling company could exploit only by mastering the art and science of marketing, selling, storing, and shipping hundreds of thousands of titles. The resulting lessons it learned and innovations it developed became the foundation for its rapid expansion into other types of merchandise.

Selling books shaped Amazon as much as Amazon reshaped how books are sold.

A gift from book publishers

Amazon recognized early on that each unique snowflake of a book came with a gift from its publisher: book metadata. That’s the information about each title (such as genre, author, description, unique ID number, and reviews) that traditionally enabled bookstores and libraries to decide what to buy and where to shelve it.

A 2006 Amazon promotion
Amazon took the radical (in the mid-1990s) step of putting all that metadata online, enabling it to dominate book-related searches.

Without Amazon having to spend a cent on marketing, consumers soon learned via the likes of Yahoo! and later Google where to find a title not stocked by their local bookstore. And they learned Amazon would show them similar books, using a recommendation engine fueled by book metadata and other customers' purchase history.

I’m told it took well over a decade for the traditional book-publishing industry to grasp that book metadata should be written for algorithms and consumers, not just for professional book buyers. By then, Amazon had long since leveraged what it learned about the data-based selling of printed books to dominate the e-book business – and to power its moves into selling everything from toasters to groceries.

A gateway drug

To make books a true gateway drug to the Amazon experience, it wasn’t enough just to stock every book publishers had to offer. Too much of the demand was for books that were no longer in print.

From Amazon's Japanese-language site
Amazon had to lure those used books out of myriad basements and offline stores by creating a marketplace that even non-techies could use to sell their wares. That was the beginning of what became a major competitive advantage for Amazon – its third-party sellers, which generate nearly half of the site’s sales.

Books were also the launching pad for Amazon’s entry into the gadget business nearly 10 years ago with the release of its first Kindle. That venture has traveled light-years from those humble, monochromatic beginnings to a new Alexa-enabled world filled with Fires and Echoes.

Revolution, then civil war

“Kindle” itself morphed from a device to an entire ebook-publishing ecosystem that brought both revolution and civil war to the book industry. The Kindle Revolution popularized the struggling ebook category and democratized publishing by enabling authors to bypass the traditional world of publishers and middlemen.

To those in the traditional book-publishing business, Amazon is the Evil Empire, hell-bent on destroying both book publishing companies and competing book sellers. On the other side of the civil war are myriad author-entrepreneurs hailing Amazon as the white knight who valiantly liberated publishing from snobby, self-appointed gatekeepers so that anyone can publish a book.

Neither side seems to understand Amazon, because they envision Amazon as being fundamentally a seller of books. It’s not. A 2014 New Yorker article indicated that Amazon gets at most 7% of its annual revenue from books.

Where’s Chapter 11?

Journalists and book publishers have been assuming for years that Amazon wanted to drive Barnes and Noble out of business. I don’t buy it. Why create a firestorm of legal entanglements and public-relations backlash for the entire company just to boost profits in a relatively slow-growth 7% of your business?

Amazon Books in Tigard, Oregon. By Steve Morgan
If Amazon really wanted to drive large bookstores out of business, don’t you think B&N would be in bankruptcy reorganization by now? And wouldn’t Amazon’s new brick-and-mortar stores at least match the 20,000-title selection of a small B&N instead of offering only 5,000 titles?

Besides, I don’t think book selling for Amazon is about profits. It’s about data and branding. As I wrote in Magazines in the Amazon, a recent Publishing Executive article, Amazon is “a master at using customers’ purchase and search data to determine what other products to pitch to them – and, increasingly, to sell ads to third parties.”

Fifty Shades of Data

More than almost any other purchases, the books someone buys and browses, whether print or ebook, provide Amazon valuable insights into what other products she might buy and which ads she might click. (Magazine purchases can be even more revealing, which I think is why Amazon is selling single-copy magazines in its new brick-and-mortar stores even though it doesn’t market them on its web site.)

In the ecommerce and programmatic advertising worlds, such information about people’s interests and purchase intent is gold.

Some book purchases are more revealing than others. I assume that people interested in travel guides are relatively likely to click on luggage ads, that buyers of how-to guides often need tools or other equipment as well, and that Fifty Shades of Grey readers have a fondness for certain adult toys.

And I’m sure that Amazon’s algorithms have found many other valuable correlations -- correlations that would never occur to the human brain -- between what people read and what else they’ll click or buy.

In other words, for Amazon, some books are more valuable than others. That may explain why Amazon seems to discount select books to seemingly unprofitable levels, allows third-party sellers to charge as little as 1 cent for used books, and encourages self-publishers to offer 99-cent and even free ebook editions.

When there are such strong incentives to know what books people are searching for and especially what they’re buying, profit on book sales naturally takes a back seat.

Big McAmazon

Obvious question: If Amazon makes little or no profit from selling books, why is it opening a chain of brick-and-mortar bookstores?

Answer: It’s not. Amazon Books is probably a bookstore in the same sense that McDonald’s is a hamburger restaurant. Burgers are of course the featured attraction at Mickey D’s, yet almost all the profits come from side items. But who’s going to eat at a fries-and-soft-drinks joint?

Early reports indicate that about half of the new Amazon Books stores are actually devoted to books. The rest of the space offers appliances, Amazon-branded gadgets, magazines, and other non-book merchandise and displays.

Amazon wants you to think of these places as bookstores – as places where interesting, curious people go to browse. The real money may be in getting those browsers to check out the Fires, Echoes, and Cuisinarts. But if people wanted to hang out at appliance stores the way they do at bookstores, Best Buy would be a major tourist attraction.

The hipsters' Walmart

In many ways, Amazon is the Sam Walton model translated to the digital age – massive selection, with low prices made possible by both scale and an incessant drive for efficiency. There’s significant overlap in the products offered by Amazon and Walmart. Yet why has Amazon escaped the downscale, hope-my-friends-don’t-find-out-I-shop-there image that plagues Walmart?

Books. Plenty of people buy from both Amazon and Walmart, but the public’s perception of the two brands are vastly different. Amazon’s beginnings as an online bookseller meant its clientele was – and still is -- assumed to be hip and educated. Because of Walmart’s start in small-town USA, it’s still the butt of many a comedian’s quip about the denizens of double-wides.

In marketing, perception is reality. That’s why Amazon still wants people to think of it as a bookseller and to ignore that 7% statistic.

If Amazon’s vision to be The Everything Store continues to mean a 20+% annual growth rate, books will constitute an ever-shrinking proportion of its sales. Nevertheless, books are likely to remain Amazon’s Big Mac – not very profitable but still central to its brand identity and its strategy.

Other Dead Tree articles about Amazon include: