Direct Mail Weathers the Great Supply-Chain Storm of 2022

With the Finnish Paperworkers Union announcing that they would be extending their strike another three weeks, now tentatively ending on February 19^th, an already tight paper market has become even tighter.

In an era ripe with the ripple effects of supply chain challenges and on the cusp of a direct mail rebound, this seemingly distant and benign news has a surprising impact on every household and business nationwide. 

It is critical to set the foundation - to understand the impact truly, so here goes...

Mailbox Appreciation | Audience Shift | Workplace Shift | What makes 2021 so different?

What does this have to do with Finland? | How do you weather the storm? | So, where do you begin?While the direct mail advertising market has undoubtedly changed over the last few years, and it will continue to change, the message is clear – direct mail remains a cornerstone of marketing.

Direct Mail initially took a hit in 2020, with spending decreasing by 17%. However, 2021 far exceeded the forecasted rebounds of 5%. As of the end of Q3 2021, direct mail volume was already up 34%.

With COVID-19 continuing to rear its ugly head, two years later, a combination of factors - mailbox appreciation, audience shifts, and workplace shifts - have breathed new life into the traditional medium and its methods. As Jeff Heyman, VP of Product Development and E-Commerce at FedEx Office, explained, “Customers are longing for connection after being home for so long and direct mail gives that to them. It allows businesses to that they are open for business, and how they have adapted their business throughout the pandemic.” 

As we enter into 2022, the importance, appreciation, and impact of direct mail have increased exponentially.

Although consumers have been trained to be digital-first, they are not digital-only. In fact, 75% report being overwhelmed by their daily digital ad exposure.

Of those who have become accustomed to video calls, 57% report feeling worn out or fatigued from spending time on video calls. This feeling is very real. “Zoom fatigue” is being reported as potentially part of a more extensive experience - computer-mediated communication (CMC) exhaustion - caused by prolonged use of CMC platforms.

"Digital exhaustion," “digital fatigue,” "Zoom fatigue" - whatever you want to call it - has become a very real part of our "new normal" and Is having a direct impact on consumer behavior. The average consumer receives 605 emails in a given week but only 16.8 pieces of mail. That amounts to receiving 36 emails for every 1 piece of mail in their mailbox.

Consumer sentiment is reflecting a greater appreciation for direct mail. Gallup reports that 41% of consumers say they look forward to checking their mailbox daily - even though USPS reports that almost 60% of mail is marketing mail. Similarly, 59% of Americans enjoy learning about new products via direct mail.

Digital fatigue and chronic ads interruptions in their app and website experience are causing consumers to abandon sites and even brands altogether. This fatigue is reflected in marketers' results.

Younger and more receptive.

Direct mail continues to resonate with younger generations. Younger generations, born in the digital age, report that they value touching and holding paper and that this leads to positive feelings about direct mail.

Such positive sentiments are in stark contrast with the 49% of adults under 30 reporting that they are electively cutting back on the time they spend online or on their smartphones.

The Future of Direct Mail: An Opportunity for Unified Marketing Strategy

Millennials also react more favorably to relevant and creative direct mail pieces than boomers or Gen Xers, particularly when part of a multi-channel campaign. 

Gen Z, Millennials, and Gen X also all rank higher than Baby Boomers in actions taken as a result of receiving direct mail. Upon receiving direct mail, younger generations outperform Baby Boomers in:

• Purchasing
• Visiting a brand’s website
• Following a brand on social media
• Becoming more aware of a brand
• Inquiring about a product or service

But this generational shift is not the only significant shift to direct mail services. The last two years brought about unprecedented changes in the workplace – and these shifts are sticking around.

Remote work is here to stay.

Businesses nationwide have begun to accept that things will never return to “normal.”

Working From Home Research Project reports that about 55% of workers will work entirely on site after the pandemic, 30% will have “hybrid” working arrangements, and 15% will be fully remote.

In comparing pre-COVID, peak COVID and post-COVID, the volume of remote “working days” remains substantial. Calculating by “working days,” approximately 5% of working days were remote prior to COVID, 45% during COVID’s peak, and are predicted to be about 28% after COVID (up from an estimated 20% at the start of 2021).

DIRECT MAIL RESPONSE RATES

More people are attuned to the home mailbox, with more people working at home. This translates to higher open and response rates – differences that matter.

With hundreds of advertisements flooding inboxes daily, consumers are becoming more and more immune to their effectiveness and subconsciously train themselves to ignore them. 57% of email addresses are abandoned because the users receive too many marketing emails.

Only about 20-30% of marketing emails are opened, while up to 90% of postal mail is opened. And of those 20-30% of opened, only about 44% of recipients can recall a brand immediately after seeing their email advertisement. 

Not only does the open rate of direct mail outperform email by upwards of 450%, but direct mail brand recall outperforms email by 170%. Marketing Profs reports that 75% of people who receive direct mail advertisements can recall the brand immediately after seeing the ad, compared to only 44% for digital ads.

Direct mail response rate is also up to nine times higher than email marketing response rates. 

DIRECT MAIL LINGERS

Snail mail lingers, and that holds value. Not only are people more receptive to direct mail, but they treat snail mail and email differently.

AVERAGE LIFESPAN OF MAIL

Yes, it is that dramatic - 17 days vs. 17 seconds.

Jose Maria Barrero (ITAM Business) (2022); United States Postal Service; Marketing Charts; United States Postal Service; Data & Marketing Association; Epsilon; United States Postal Service

Digitalization has put pressure on the world’s printing and writing paper trade.

Over the past decade, global imports of printing and writing paper dropped from 47M tonnes in 2010 to 31M tonnes in 2020. In value terms, imports declined to $27.6B.

But in 2021, the direct mail industry saw rapid and consistent changes as a result of:

• shifts in the U.S. remote workforce
• global supply chain disruptions (particularly the paper market)
• national labor shortages
• evolution as companies looked for new ways to reach consumers
• demand for white paper products increased 5% to 10% year-over-year

Disruptive supply shortages, delivery delays, and labor shortages extended “from the front office to the back dock and everyone in between.”

In 2022, as the print industry adapts to changing consumer demands and ongoing economic instability, rapid changes are expected to continue. Demand remains highly volatile, physical supply chains are often disrupted, and continued uncertainty has caused unpredictable events. Throughout 2022, pressure will continue to mount, and COVID-19 variants will continue to resurface.

As 2022 has already made clear to everyone, supply-chain issues are not something we left behind in 2021.

Finland is a key factor in the paper supply market. 

"World – Printing and Writing Paper – Market Analysis, Forecast, Size, Trends and Insights’ reports Finland as the third-largest supplier of printing and writing paper, with an estimated 2.7M tonnes annually.

Finland's exporting market falls only to Germany (4.2M tonnes) and Indonesia (3.2M tonnes) and is surprisingly significantly larger than the assumed supplier, China (1.8M tonnes). Combined, Germany, Indonesia, and Finland comprise 30% of the global exports, with an estimated value of just under $6 billion annually.

PAPER IMPORTING MARKET BY VALUE

The United States represents the largest importing market in value, with the printing and writing paper import market estimated at $2.9B in 2020.

At 10% of the worldwide importing market, the United States ($2.9B) is in stark contrast to the other major importing players, Germany ($2.8B) and France ($1.7B). The three major markets combine to total 27% of the worldwide import market for printing and writing paper.

PAPER IMPORTING MARKET BY VOLUME

In terms of volume in 2020, the United States falls second only to Germany, the leading exporter. With Germany importing an estimated 3.3M tonnes in 2020 and exporting 4.2M tonnes, it just barely eclipses the United States at an estimated 3.2M.

The significant difference is that Germany is not as dependent on imports to meet demand as the United States. While Germany’s exporting volume far exceeds its importing volume, the United States is the opposite, and to an extreme.

Germany exports more than it imports, and its importing volume is only a fraction of its exporting volume. The United States, on the other hand, is the opposite. The United States exports only a fraction of what it imports - importing approximately 3.2M tonnes while exporting only 1.1M tonnes. The United States' importing volume is almost three times (290%) larger than its exporting volume.

Even more so, the United States' dependence on importing (2.1M tonnes) exceeds the entire third-largest market, France, at 1.9M tonnes. Given the sheer volume of printing and writing paper imported into the United States annually and the United States' dependence on importing to meet demand, there is no choice but to depend on Finland.

THE PAPERWORKERS UNION STRIKE 

The initial strike that began on January 1, 2022, was set to expire on January 22nd but was instead extended on January 5th until February 5, 2022. Subsequently, on January 20th, the strike was extended until February 19, 2022. 

But indeed, history repeats itself, and the Finnish Transport Workers’ Union announced on January 22, 2022, that they would be commencing a blockade of Finnish ports as of 6 AM, Monday, January 24, 2022, in support of the Finnish Paperworkers’ Union. According to Ismo Kokko, President of the transport workers’ union, this “will last as long as its needed, meaning until the paper workers union and UPM come to an agreement.”

By refusing to handle UPM paper, pulp, or board products, Finland's entire paper supply chain is brought to a standstill. And it will remain that way until an agreement is reached.

Plan Proactively. Diversifying Options. Building Relationships.

Resiliency is key. Supply-chain resiliency must be an essential component of strategic planning in 2022.

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