Minneapolis labels adapt to postage hikes
It's tough to say who has it worse in 2013, the declining music industry or the U.S. Postal Service. According to an NPR report, the USPS is losing about $25 million per day, and so its problems are being passed along to independent music labels in the form of noticeably higher international shipping rates as of January. Recently, City Pages put out a call to several labels to measure our local postal pain.
While shipping rates vary, the recent USPS increases have raised the average cost of shipping a 12-inch record out of the United States by up to 50 percent. This change primarily affects First Class International mail under four pounds — meaning it hits the small labels that often send out just a couple of items at a time. Wholesalers can work around the new rates because larger packages are relatively unaffected. Do Twin Cities-based imprints think these extra expenses will be a final nail in the coffin to their trade?
Hardly so, says Modern Radio Record Label's Peter Mielech. "There's not really anyone in town that does this exclusively for a living, so this isn't going to put anyone out on the street," he says.
Modern Radio and other local outposts like Big Action Records, De Stijl, Rhymesayers, and local vinyl trader Gojohnnygo vary in size and specialty, and ship anywhere from a few items each month to upward of 20 percent of their business internationally. To reduce costs, larger labels like Rhymesayers use their relationships with distribution centers, and Modern Radio will occasionally license out European pressings, as it did with the latest from STNNNG, Empire Inward.
"I am hoping to work with more distros in Europe," says Big Action's Jason Zaborowski. However, such options are difficult to arrange for boutique labels. The USPS offers negotiated service agreements with larger shipping companies, but small labels are nowhere near the volume to meet such requirements.
Instead of reducing sales, the labels concede, the new rates may affect how customers order instead. Both De Stijl and Gojohnnygo noted diminished sales at first, but those rates have already started to bounce back. Gojohnnygo perhaps trades in the highest international volume, shipping nearly 35 percent of its orders out of the U.S.
"The more expensive items are now selling overseas, since postage is a smaller percentage of the total in that case," notes Gojohnnygo owner John Kass. Similarly, De Stijl's Clint Simonson observes, "We're hoping to see more multiple LP sales, because if you buy four LPs you get very close to what the pre-hike rates were."
Nearly all the labels have passed the increased cost to their consumers. The USPS works with over 190 countries and ships more than 40 percent of the world's parcels, so how have buyers reacted?
Americans expect cheap and efficient service, and fielding competitive pricing while meeting myriad regulations is a challenge. This current increase, explains USPS Pricing, is tied to Customs regulations and related labor costs — regulations that were already being enacted on larger first class items, hence the sizable increase to specifically lighter packages this time.
Even with the increase, USPS rates are still the most competitive option. "It's important to understand the entire cost involved to ship a package," notes Minnesota's USPS media representative, Pete Nowacki. "The bottom line is that the First-Class Package International Service is still the least expensive shipping option available to more than 180 countries."
The service continues to offer online discounts through Click-n-Ship and postage vendors, flat rate options, and free packaging and package pickup without added surcharges, distinguishing them from competitors. While prices are unlikely to return to earlier structures, legislation to reduce overall costs incurred by the Post Office could help to reduce future increases.
"USA postage prices have been artificially low for years," Kass notes. "[They] were one-third the rate for European sellers."
European music fans are already used to higher shipping rates, not to mention higher music prices in general. Those seeking independent U.S. releases are devoted fans and collectors who are willing to absorb more cost to get their fix. "Buying collectible records is a fetish ... there is a bit of an addiction mentality there," says Kass, adding, "I should know, with 450,000 records myself."
One thing remains certain. When asked flat-out if the price hike threatens their labels, the answer was a resounding no. "Our label's success is driven by the quality of music our artists create," says Ashanti Abdullah of Rhymesayers. Or, as Mielech more directly puts it, "Our model isn't designed for moving as many units as possible. We're not making cogs here."
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