1 to 3 percent. Consequently, low postal rates are extremely essential if shippers from Florida are to continue mail solicitations for business at that time of the year. While a small increase in mail rates might seem insignficant in the overall cost of a mailing program, it must be considered that our packages only sell for an average price of approximately $5 f.o.b. Florida. We are not selling automobiles, but a low-priced agricultural commodity, where the markup in dollars and cents per package is not very great. Almost 40 percent of our members' business is done in December. Consequently, there are many times during the year when business is slow, which enables the shipper to take the necessary added time in the preparation of bulk mail. And this is one of the most important points for the committee to consider. Every small business does not operate at the same volume level during any business period. If these same businesses can utilize some of this unproductive time to perform some of the functions of the Post Office, as is done in the preparation of third-class mail offered at a bulk rate, and thereby reduce their mailing costs, then these businesses must be given the opportunity to do this. The Post Office is a monopoly; a monopoly not in the manner of one which charges all that the traffic can bear, or takes advantage of those it serves, but a monopoly in the sense that there is no one else to deliver our mail. Therefore, it is the duty of Congress to see that the postal system gives business the opportunity to perform some of the postal mail functions in order to reduce mail rates on material which is sent out to obtain business, and which in turn makes our economy a more healthy one. The very basis of a free economy is one of choice. Individuals or firms have a choice to engage in economic activities which perhaps they can do more efficiently than others, and thereby realize a profit and usually a reduction in cost of the finished product. The Postmaster, in his efforts to do away with third-class mail, either through legislation or increased rates, wishes to remove' this area of choice which is so essential to our survival through direct mail advertising. In 1956 your committee conducted hearings on H.R. 9228. The authors of H.R. 9228 stated that "In the exercise of its power to determine and prescribe a fair and reasonable domestic postal-rate structure, the Commission shall consider, among other factors, (1) the effect of the rates on the movement of mail matter for which the rates are prescribed." This is a very vital point on which your committee is now very concerned with as much as it was in 1956. My industry survey showed that 74 percent of those reporting indicated that higher postal rates would reduce the quantity of mail they send out. An increase in rates is not always the cure for a postal deficit. The postal system is one with large fixed cost. If a large percentage of mail is eliminated because of increased postal rates, it is quite possible for the cost of the remaining mailing pieces handled by the Post Office to increase. And who is benefited under such a procedure? certainly not the taxpayer, small business, the consuming public, the postal system, or the economy of this country. In 1959 third-class mail represented 28 percent of all mailing pieces handled by the Post Office. Maybe Postmaster Summerfield can gamble with the effect increased rates may have on this volume so important to the postal system, but the growers of citrus fruit in Florida cannot. Therefore, we ask that the committee consider very carefully any legislation to increase mail rates. Thank you for receiving this statement, and its insertion in the record. WILLIAM A. STUBBS, Secretary-Treasurer. STATEMENT OF EDWIN G. HERRING, ASSISTANT VICE PRESIDENT, DIAL FINANCE Co., DES MOINES, IOWA Dial Finance Co. is engaged in the business of making cash installment loans in amounts of $2,500 or less to employed individuals. We have 150 branch operating units located in 101 cities and 21 States. We employ a total of 1,079 people. Our business is licensed, regulated, and our rates of charge are set by statute or regulatory bodies established by statute in each of the States in which we operate. For 30 years or more we have used direct mail advertising as the means of acquainting potential customers of the service which we have to offer. We use other advertising media; however, direct mail has been the only media we have used year in and year out. We operate a mailing department employing 24 persons and a printing department employing 22 persons, of which 13 are engaged primarily in the production of direct mail advertising. This is a total of 37 individuals engaged in the preparation and mailing of third-class mail. In recent years, our annual quantity mailed has varied from 10,800,000 in 1956 to a high of 16,500,000 in 1958. In 1959 we mailed slightly over 14 million pieces. Since 1925 we have made a specialty of lending by mail to worthy borrowers who live predominately in small communities and rural areas which are completely lacking in the type of credit service we offer. We now serve 33,268 customers completely by mail, and a majority of these people were advised of the service we offer through the medium of third-class mail. The use of third-class mail has been important to our company, and its employees, and to many of our customers it has been a means of locating a source of funds with which they could meet emergencies, consolidate their debts, or purchase goods for which they might not otherwise be able to obtain credit. In our use of third-class mail, postage is the largest single item of expense incurred. Our mailing costs vary from approximately $37.50 per thousand to $48.85 per thousand, depending upon the size, quality, and number of inserts in the assembly. Of this cost, $20 per 1,000 pieces, or approximately 50 percent, is postage expense. The remaining 50 percent covers the entire cost of our production and mailing of the advertising assembly, including the miscellaneous operations required in preparing this mail for acceptance at the thirdclass rate. These operations are: Affixing postage in a form so that cancellation by the post office is unnecessary, facing, sorting by cities and by States, tying, sacking, tagging the mailbag for distribution to trains, delivering to post office, furnishing a mailing statement of the number of pieces mailed, and the total postage cost of the mailing. In addition, we accept delayed service for the delivery of this mail to its final destination. Ninety percent of our third-class mail delivered to the post office is ready to be placed on a train for delivery to the city or State terminal for which it is destined. Seventy-six percent is ready to be sorted to the carrier and 14 percent will go to a State terminal for sorting to the community in which it is to be delivered. Only 10 percent of our mail requires any handling at the post office in which it is posted. The payment of postage on this mail is made in large amounts by advance deposit. In 1959 we paid our $280,000 third-class postage bill by issuing 14 checks of $20,000 each. This minimizes the number of transactions for the payment of postage as compared to other classes of mail. Since our rates of charge are fixed by the regulatory body in the States in which we operate, increased postage expense is not something we can pass on to our consumer. Our mailing costs are already at a very low figure and there is little opportunity for us to offset increased postage with a reduction in other production costs. Any increase in third-class rates beyond the present 2-cent rate will price us out of the third-class mail market. Any increase in postage rates will affect Government revenue from the income tax. For a company spending $100,000 per year on third-class postage, a one-half cent increase in third-class postage rates will increase its postage expense and tax deduction $25,000 per year-assuming the quantity mailed remains the same. If this company is in a 52-percent income tax bracket, this $25,000 increase in its tax deduction will reduce the revenue of the general fund by $13,000, leaving a net increase to the Government of only $12,000 rather than $25,000. Also affecting Government revenues is the income tax on our own profits generated as a result of third-class mail and income taxes on salaries of our own employees and the employees and profits of our suppliers of mailing equipment and materials. If increasing the postage rate results in taking money out of one governmental pocket and putting it into another, then business should not be priced out of a worthwhile service merely because it looks good on one side of the ledger. Our position with respect to third-class mail rates is as follows: 1. Postage now constitutes approximately one-half the cost of our direct mail advertising. Further third-class postage increases will not improve the pulling power of our advertising, cannot be passed on to our consumer, and cannot be offset by reduction in our own production costs. Because of the high ratio of postage to other costs, any increase in postage rates will result in a reduced volume of third-class mail used by our company and will not produce the 25 percent increase in revenue anticipated by the post office insofar as we are concerned. 2. Postage rate increases in 1952 and 1959 have already placed a heavy burden on a major uncontrollable portion of our mailing costs. Futher increases, including the one-half cent scheduled for July 1, 1960, will make the cost of direct mail as a mass media prohibitive. 3. In view of our acceptance of delayed service and the amount of work we do prior to mailing, we believe existing rates on third-class mail are sufficient and should be maintained. Hon. Toм MURRAY, THE FARMER-STOCKMAN, Oklahoma City, Okla., June 1, 1960. Chairman, House Post Office and Civil Service Committee, DEAR MR. MURRAY: For nearly 50 years the Farmer-Stockman has been serving farmers and ranchers in the Southwest to help them farm better and live better. This has been possible by use of second-class mail to deliver copies of our magazine to its subscribers. Today we mail more than 430,000 copies each month to people in this area who are dedicated to producing the food and fiber necessary for our existence. This longtime service to people engaged in agriculture should place the Farmer-Stockman among the highest in priority in second-class mail usage with assurance of reasonable postage rates. Because of this, we are opposed to the increase in second-class postage rates proposed in bill H.R. 11140. From what we have heard and read, there seems to be discrepancies in ways of figuring costs for handling second-class mail. Also, the Post Office Department seems to have lost sight of the Postal Policy Act of 1958 when stating that in 1959 there was a deficit of $303 million for this type of service. If the costs of second-class mail were reduced by 50 percent as they were under the formula of former Deputy Postmaster General Maurice Stans, and if the full value of public services called for in the Postal Policy Act of 1958 were credited, the actual deficit from second-class mail would be under $50 million. In connection with second-class mail, we believe the conclusions reached by McKinsey & Co. are misleading. Due at least in part to increased second-class mail rates, the cost of postage for the Farmer-Stockman in 1959 increased 40 percent over the year before. If one-half cent per copy is added to the reading and zone-rate charged, our postage would be increased another 76 percent or nearly 150 percent more than the postage bill was in 1958. For reasons well known in the publishing business, this big jump in costs could not be passed on to subscribers or advertisers. Profits in the farm-paper publishing business have been at a minimum in recent years. There is no doubt but what a large increase in costs-such as the proposed bill to increase second-class postage could put quite a few farm publications out of business. We sincerely urge that your committee give serious consideration to this most important matter. Yours very truly, J. H. HUNTER, Director of Advertising. Hon. Toм MURRAY, HABAND Co., Paterson, N.J., June 2, 1960. Chairman, Committee on Post Office and Civil Service, House of Representatives, Washington, D.C. DEAR SIR: It was very disappointing to learn that I am not to have the opportunity to appear before your committee and show you the deadly seriousness to Haband Co., its 200 employees, and its many, many suppliers, of the new rates proposed for third-class mail. There are two arguments which I had wanted to present. One completely unchallengeable. The other one rather spectacular if I could have presented it in person. I will set them both down in writing in this letter and hope that they help you in reaching your conclusions. First, I want to present the blunt, brief, and unassailable fact that the new rates proposed for third-class mail will put Haband Co. out of business. Here is the proof: Our report to the Internal Revenue System for 1959 records the highest annual dollar volume of business we ever had. As the same report shows, we made a relatively satisfactory profit on it. But hear this. Had the new rates been in effect in that year, that entire profit, plus all compensation to the management (we are a partnership, not a corporation) would have been completely wiped out. On top of that, we would have carried over a five figure deficit in starting the new year. It's just as simple as that. It's just as bad as that. Please note that we referred to our high dollar volume in 1959. This was due to hard work, heavy investment in automation and inventory, and the ultimate development of all the mail-order techniques we have learned in our 35 years of practice. The fact that a profit was worked out of it in spite of the rate increases in third-class mail and the many other inflationary developments in labor, materials, and taxes, gives lie to any idea that the McKinsey group, or anyone else, could squeeze out additional profits through any such nit-picking as, "improved mailing lists," etc., etc., etc., to overcome the unrealistic new postal rates. The second demonstration I intended to offer you was a new and a concrete demonstration that the public wants to receive direct mail. Others will point out that we wouldn't be mailing our circulars if people didn't open them, read them and, above all, act on them. Apparently, the opportunity to buy by mail is important to millions of people and I am going to show you that there are those who even invite direct mail. To that end, I am sending over 600 letters and postcards to you, every one of which is from an individual, including business and professional men, somewhere in the United States, big cities and small cities, east and west, north and south, requesting us to send our advertising to them. Let me explain how this accumulation came about. Over the weekend of April 2 and 3, I heard that some Congressman had expressed a willingness to let third-class mail die because, "No one wants the stuff anyway." On Monday morning, April 4, I returned to this office and started this collection of letters which I am sending you. These letters came from prospective buyers who have never heard from Haband Co. directly. We publish no advertising of any kind, nor do we do any radio or television selling. We don't ask our customers for the names of their friends. We advertise only by direct mail. None of the writers of these 600 letters had received any direct mail from us, but had heard about us and wanted our circulars. Of course, we complied with their requests. About 35 percent of them, or more than 200, have or will order merchandise from us. This is a fairly standard rate of response on this type of inquiry. The number of these inquiries will increase as the fall approaches and the complete year will bring us approximately a total of 10,000 of them. It seems to me that this is a very dramatic and conclusive demonstration that the public does have an interest and advantage in the operation of the direct mail business. And, the argument should be given full weight against the arguments of interested parties who state blandly that the public doesn't like to get direct mail in spite of the billions the consumer expends as a result of third-class mail. It is my hope that you will give a quick glance at the 600 letters I am sending you and that if the opportunity presents, you will allow other members on your committee to see them also. When they have served your purpose, Mr. Murray, please dispose of them. There's no reason at all for returning them to us. Thank you for allowing me to present this information this way, in view of the fact that circumstances compelled you to deny me the opportunity of appearing before you in person. Very truly yours, M. HABERNICKEL, Jr. STATEMENT OF K. STANLEY ZOLYN, WESTFIELD, MASS. My name is K. Stanley Zolyn. I am secretary of White Industries, Inc., of Westfield, Mass., doing a retail business under the name of White's Quaint Shop and Arthur T. White, "The Magazine Bargain Man," wholesale under the name of Thomas Terry Studios. Arthur T. White started this business as a 16-year-old on a farm outside Westfield 47 years ago after being severely stricken with polio. He is still active in the business. The first years were difficult ones and the first customers were few. But after a long, hard struggle satisfied customers began to tell friends and the list grew and grew. Today we have customers in all States, many of them still with us from the beginning, many others for 20 and 25 years and longer. The business has been built on a guarantee of satisfaction or your money refunded and the fact these loyal customers order from us year after year is proof of their good will and satisfaction. We are a small company selling by mail greeting cards, gifts, stationery, household items, and magazine subscriptions. Ninety-eight percent of all our orders come to us from literature sent by third-class mail. We use first-class mail to acknowledge orders and answer correspondence; parcel post to ship the biggest percent of our orders. That is why postage rates are most important to us. Postage, including third class, first class and parcel post costs us 182 cents out of every dollar's worth of merchandise we sell. For a 12-month period postage has cost us $515,896. Before detailing the extreme jeopardy in which any further postal increases will place us, let me point out what we as one small company mean to our own local Westfield, Mass., post office. In this community of about 23,000 population we are provided with both a main post office and a branch office. Last year total receipts from both offices ran somewhat over $900,000. Of this amount our company alone provided well over 50 percent of these receipts or the amount mentioned above, $515,896. An important point which we cannot forget is this. Regardless of what happens to White Industries, Inc.-whether we continue to survive and prosper or go broke these two offices will still have to be maintained by the Post Office Department to serve the citizens of our community. Were we as a company not in town to contribute so heavily to the revenues of the post office, it is difficult to see how its costs of operation would drop in proportion since so much of our mail is bulk third-class. In addition to paying for the privilege of using this class of mail we do a large portion of the work involved including picking up incoming mail and trucking outgoing mail to the post office. Before actually delivering to the post office, we must sort it carefully, count it, cancel, face, tie, and sack it, labeling the sacks carefully. In other words, for the over $500,000 we pay to the local post office annually, the labor involved for it is minimal. And even this is performed after other classes of mail have been worked, in off hours and off periods. To provide proper service for 23,000 citizens much of the labor force would still have to be retained even though we weren't around to provide the substantial sums which the Westfield post office presently derives from us. Perhaps a proper question to be asked is where does a small post office find better than a half million dollars, should it through the shortsightedness of departmental policy one day find itself searching to replace some part or perhaps all of this revenue which it has been receiving in ever-increasing amounts for 47 years? Would it not seem wise for the Post Office Department to encourage the continued existence of our company and thousands like us rather than beating us to death with never-ending demands for postal increases? When third-class mail advanced 33% percent on January 1, 1959, our costs increased about $35,000 extra annually. It increases again July 1, 1960, and this will cost us $35,000 more. That's a jump of $70,000 on third-class mail alone in just 18 months. And this on top of previous increases, all of which total a jump of 150 percent on the minimum piece rate since 1952. But that isn't all of the story. On February 1, 1960, parcel post advanced from 17 to 35 percent based on zone and weight. That's an average of about 25 percent. Since the bulk of our business is done in the fall months, this extra cost to us can only be estimated. But based on the months the new rate has already been in effect this increase will add about $85,000 annually to our postage bill. That means we'll be paying $155,000 more each year for postage than we paid before January 1, 1959, on the same volume of business. Do you wonder why we are not only worried but actually scared? Our profits after taxes are less than 2 percent, even without these increases, on which of course Federal and State taxes are paid. Now with the possibility of profits dropping to practically nothing or the even grimmer possibility of going into the red everybody will be the loser, including the Post Office and Internal Revenue Departments. |