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What the USPS Rate Increase Means for Ecommerce Shippers

by Mike DeFabis on 2016-01-29 15:05:14

We all knew this day would come and if we didn’t, we would just be lying to ourselves.  On January 17, 2016 the USPS rate increase went into effect.  It was a tough pill to swallow for many companies who spent much of 2015 moving packages away from UPS and FedEx, with the new dim weight changes, and over to USPS.  It appears that all the USPS did was to try and capture as much business away from UPS and FedEx as possible during 2015 only to jack rates up in 2016. 

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ABOUT THE RATE INCREASE

Yearly rate increases are common among parcel carriers and usually range anywhere from 3-5%, but this USPS rate increase was a little more.  Priority mail had an overall rate increase of 9.8%, first class mail had an overall increase of 12.8% and standard post (now retail ground) increased 10%.  You can find more information on the rate increases by service here

THE EFFECT ON SHIPPERS

So the obvious is that when rates go up - you pay more, but it's not just on your USPS services.  This rate increase effected everyone including many mail consolidation companies.  Services like Mail Innovations, SurePost, SmartPost, DHL eCommerce etc. will all have rate increases attached because of this.  This rate increase might not be felt as strong with SurePost and SmartPost due to their ability to deliver deeper into the postal network, but for smaller mail consolidation companies their margins are getting squeezed out. 

THE WHY 

From a top level view it appears that the USPS is just increasing rates to grow revenue and stay the course with UPS and FedEx.  As you start to dig deeper into the rate increase though, it appears that USPS is trying to squeeze out some of the smaller mail consolidation companies.  Rate increases are even more dramatic at the SCF and NDC levels.  For consolidation companies that are not able to drop packages at the DDU level their margins are being a cut dramatically.  This very well could be an initial push for the USPS to focus more on being that exclusive final mile carrier.

THE SOLUTION

USPS is still a very good residential shipping option for many zones and weights compared to UPS and FedEx.  It is also still a very good shipping option for shipments under 1lb, especially with First Class mail.  If you are using a mail consolidation service make sure to check on what your new rates are if they have not presented them to you already.  Compare those rates with other consolidation companies especially if you are using a smaller company that might not have the volume to drop into the DDU level.  Reevaluating your rates is extremely important because you can’t afford not to. 

For more information on IDS and how we can help with your USPS rate increase solution, contact us today!

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