When you hear the phrase “rate increases” you normally think of FedEx, UPS or DHL. However, the United States Postal Service (USPS) proposed record-breaking rate increases earlier this year to begin January 27, 2019. The Postal Regulatory Commission, the institution that regulates USPS, reviewed the proposed terms and gave its stamp of approval. If you are a shipper using USPS frequently, then read this article to find out what you need to know about the rate adjustments.
USPS rate increases for 2019
On November 13, 2018, the Postal Regulatory Commission (PRC) approved USPS proposed rate increases for both Market Dominant (mailing) products and Competitive (shipping) products. The following rate changes will go into effect on January 27, 2019.
|Product||2018 rate||2019 rate||% increase|
|Retail Small Flat Rate Box||$7.20||$7.90||9.72%|
|Retail Medium Retail Flat Rate Box||$13.65||$14.35||5.12%|
|Retail Large Flat Rate Box||$18.90||$19.95||5.55%|
|Retail Large Flat Rate Box APO/FPO/DPO||$17.40||$18.45||6.03%|
|Retail Regular Flat Rate Envelope||$6.70||$7.35||9.7%|
|Retail Legal Size Flat Rate Envelopes||$7.00||$7.65||9.28%|
|Retail Padded Flat Rate Envelopes||$7.25||$8.00||10.34%|
USPS Priority Mail Flat Rate boxes and envelopes are often the best shipping services for many online merchants for the sheer simplicity, free packaging, and consistent rates regardless of weight or delivery destination. Priority Mail price rate increases vary from 5.12% to 10.34% which is significantly higher than the average 5.9% increase that’s been mentioned. A small flat-rate box rises from $7.20 to $7.90 next year. A medium flat-rate box increases from $13.65 to $14.35 in 2019, and a large flat-rate box changes from $18.90 to $19.95 next year. The PRC also approved a five cent (or 10%) increase on stamps, the largest increase since 1991.
More proposed changes by USPS
Many e-commerce shippers are set to face a price increase because Priority Mail (PM) Commercial Plus Pricing (CPP) rates are set to match Priority Mail (PM) Commercial Base Pricing (CBP). Many low volume shippers today are getting CPP via one of the Reseller Programs and this change can cause quite a financial disruption.
USPS plans to implement zone-based pricing on its First-Class Package Service. This is a reported 11.9% increase that will hit businesses using First-Class Package Service for order fulfillment. For shippers with a large number of outer zone shipments, the 11.9% increase will be even higher. First Class International rates will also increase by an average of 3.9%.
Also, the USPS plans to drop is DIM divisor from 194 to 166 for Priority Mail and Parcel Select parcels over 1 cubic foot. For Priority Mail Express, which had a DIM divisor of 194, it will be lowered to 166. A lower DIM divisor translates to higher charges for shippers.
Keep your eyes on the market
The rate increases are steep, but it’s important to note USPS does not add surcharges for fuel, residential delivery, Saturday delivery or seasonal surcharges around the holidays. The postal service continues to experience massive losses every year and it shouldn’t be a complete shock to see USPS pushing for rate increases to keep up with the e-commerce demand. According to Business Insider, the USPS reported a net loss of $2.7 billion on $69.6 billion in revenue in 2017. Although e-commerce is booming, it doesn’t counteract the $58.7 billion net deficit that the Post Office has accumulated over the years. Even the president recently slammed the postal service for undercharging one of its biggest customers. A combination of factors is making USPS push for higher prices on its products and services.
Now, one of the biggest challenges is how the market will react to USPS rate hikes. These rate increases could cause UPS and FedEx to reevaluate their last-mile delivery strategy and cause a loss for Amazon.
Related article: Are you ready for the 2019 FedEx rate increases?
Many shippers rely on USPS for last-mile delivery, and USPS needs more revenue if it wants to continue operating. Currently, USPS is most cost-effective for parcels weighing less than two pounds. If your product fits in Priority Mail packaging, you can save on average $2 per parcel compared to FedEx and UPS rates.
Share a Refund negotiates carrier contracts
Even with the rate increases, USPS will still be cheaper than FedEx and UPS for small businesses who aren’t able to negotiate favorable carrier contracts. If you are a shipper, that wouldn’t mind having a second set of eyes on your current carrier contract, then reach out to Share a Refund. Now is the perfect time to look for savings by examining routing logic and examining carrier contracts for savings opportunities. The Carrier Agreement Optimization Team can review your shipping profile, compare to industry averages and provide you with the best rates for UPS, FedEx and DHL contracts.