Postal Service Shipping-Rate Hike Forces Indie Labels to Change Tactics

When he started The End Records in the sepia-toned days of 1998, Andreas Katsambas would often ship albums to fans free of charge. He says shipping rates were so low at the time that he didn’t bother to pass the fee on to consumers.

“When I started mail order, priority [shipping] was a flat rate of $2.10,” Katsambas says. “So back then we would offer shipping for free because it didn’t really matter to us.”

But that was then. Today, a new round of shipping rate increases from the United States Postal Service— which now charges on a sliding, weight-based scale— is putting palpable pressure on indies like The End that still rely on direct-to-fan distribution.

The new rates went into effect January 27 and represent only a small increase for most items that are shipped within the United States. The price of a first class stamp, for instance, is now 46 cents— up by only a penny. But the rate increases for low-weight international shipments are much more pronounced. Global Express Guaranteed, the postal service’s fastest, least-used offering, increased by 9.6 percent; Express Mail International went up by 13 percent; and Priority Mail International rates have increased by 15 percent.

For small independent labels and distributors, the kind of businesses who rely on the USPS as a low-cost shipper, the price hike is more bad news for an already stressed business model.
“It’s a great cause of concern for us and for other retailers who ship internationally via the Web,” says Matt Arsenault of independent hip-hop label and distributor Fat Beats. “An EP that used to cost $11.60 to ship to the U.K. is now up to $15.08. That’s a big deal for our customers.”

Arsenault says Fat Beats ships as much as 50 percent of its orders direct to fans internationally, mostly to the U.K. but also to places like Japan and Australia. On its website, the label has taken to openly encouraging fans to buy in bulk in order to save money. A new shipping calculator in the shopping cart helps customers figure out their most cost-effective options.

“We try and let our customers know that for larger shipments over four pounds, rates haven’t really increased,” Arsenault says. “So by ordering in bulk they can save a little per unit.”

Different labels are responding to the rate increases in different ways. Katsumbas says that The End has started offering specialty packages of its releases that include bonus items like t-shirts— the thinking being that customers will be more willing to pay higher shipping costs if they can get more in the bargain. In some instances, he’s even lowered the prices of records themselves as a response to rising delivery rates.

“We offer 10 percent discounts from time to time, 20 percent during the holidays, and whenever we do it’s unbelievable how many more orders we get from overseas,” Katsumbas says.

Fred Feldman, founder of Triple Crown Records in New York, says he often points customers in the direction of competitors when they’re able to offer better shipping prices on his own records. Triple Crown uses MerchDirect for fulfillment services, which in turn relies upon the postal service for domestic and international shipping.

“In the States you have options because you can always do things like Media Mail, which takes longer but will save you money,” Feldman says. “For overseas you don’t have that. So if Amazon has a deal or if we know a wholesaler in the U.K. or Germany that has some of our stock, we’ll put a post up on the band’s Facebook saying ‘Hey, go here and you can buy this.’ We’re not exclusive that everything has to be sold through our merch store.”

As ever, hope for the survival of physical distribution rests on the shoulders of a niche audience of passionate music fans still willing to part with their dollars for the privilege of owning hard goods.

“The sort of broad, mid-tier customer who will just buy a CD from us is disappearing,” Katsumbas says. “But I think the diehards who want exclusives, who want to get something cool— I think they’re still out there.”

As they did during the advent of the 99-cent download, small shop owners have to hope that these customers will continue keep the faith— even when it hurts.

“We did a nine-LP box set last year [for the band The Dear Hunter] and that was certainly expensive to ship overseas,” Feldman says. “But the fans wanted it, they knew it was limited edition, and you know what? They bit the bullet.”