How the 2018 USPS Rate Increase Impacts Online Retailers
This is a guest post by Gordon Glazer, CMDSM, CMDSS, MDP, MDC, a senior consultant, USPS Specialist at Shipware, an innovative parcel audit and consulting firm that helps volume parcel shippers reduce shipping costs, on average, 10 percent to 30 percent. Gordon is a postal industry veteran with 31 years experience and is a sought-after speaker and industry thought leader. He welcomes your questions and comments, and can be reached at 858-724-0457 or firstname.lastname@example.org.
The USPS announced new prices for 2018 to take effect on Jan. 21. Mailing services are set to increase 1.9 percent, in line with Consumer Price Index limits. First Class Letters, Metered Letters and Post Cards will increase a penny. Shipping Services have an announced 3.9 percent increase, but shippers should note that these averages don’t necessarily reflect the true impact. Most shippers will likely experience a 5 percent or greater increase.
First Class Package Services (FCPS)
- Similar to last year, the higher ounce lanes will see the biggest increase, with another big spike for seven and eight ounces (Table 1).
- If you compare all the cumulative increases since 2014, the 14-15.999-ounce cells have increased 15 percent, while the lightest packages (one to three ounces) increased 38 percent (Table 2).
Priority Mail (PM)
- The 3.9 percent increase isn't linear; notice the wide variations in the price change deltas (Table 3).
- Base + 6.2 percent and CPP + 6.1 percent.
- Flat Rate Products will increase an average of 7 percent (Table 5).
- Regional Flat Rate will decrease an average of 11 percent (Table 6).
- Cubic pricing on the whole increases 5.2 percent, but the more expensive larger tiers and outer zones are only increasing 2 percent (Table 7).
Notable historical changes: Much larger increase in the inner zones and heavier weights. Taken into a longer context, rates have only increased 4 percent since 2014.
Parcel Select (PS)
According to a Steifel study, the USPS delivered 62 percent of all residential packages in 2016. Most of these were inducted via Parcel Select, although many may not recognize the name. Shippers are more likely to recognize popular brand names like UPS SurePost, UPS Mail Innovations, FedEx SmartPost, Newgistics, OSM Worldwide and DHL SmartMail. Collectively known as “consolidators,” these companies perform and enjoy “workshare incentives” from the Postal Service for collection, sortation, transportation and deep induction within the USPS network for final-mile delivery.
- Ounce-based Parcel Select Lightweight (PSL) will increase an average of 5.3 percent for DDU induction (Table 8).
- The average increase for PS DDU entry for packages weighing one to 10 pounds is 7.4 percent (Table 9).
- Average cumulative increase since 2014 is 31 percent (Table 10).
- First Class Package International Service (FCPIS) increase is 3.8 percent.
- Priority Mail International (PMI), Priority Mail Express International (PMEI) and Global Express Guaranteed (GXG) increases are also pegged at 3.9 percent.
While we knew this price increase was coming, those who follow this closely will be relieved to see the increases overall are modest in comparison to the last couple years. Meanwhile, the national private carriers (UPS and FedEx) have both announced holiday surcharges and dimensional-related charges that will make the USPS even more competitive in 2018. Savvy shippers will use least-cost routing intelligence that compares fully laden costs based upon desired arrival times to drive down costs and improve the customer experience. It's also well acknowledged that those who work with third-party experts pay significantly less than those that negotiate their carrier contracts by themselves. Wishing you great shipping success.