The U.S. Postal Service next month intends to raise prices on some domestic parcel services, including shipping of hazardous materials, after previously requesting approval for a 4.8% price increase on mail and package delivery.
In both cases, the rate adjustment would take place on July 12 if the Postal Regulatory Commission approves the requests.
On Monday, the Postal Service filed notice to eliminate ounce-based pricing for published commercial Ground Advantage prices, implement a 3% price increase for parcel PO Box service and make other changes.
The elimination of ounce-based pricing will not impact customers that have negotiated commercial rates for USPS Ground Advantage, the organization’s economy delivery model that offers merchants two-to-five-day transit times with pound-based, ounce-based and cubic pricing options for parcels weighing up to 70 pounds. The decision aligns Ground Advantage with the rate structure of Parcel Select, the Postal Service said.
The elimination of pricing by the ounce for lightweight shipments could hurt retailers most, industry watchers say. “A massive chunk of direct-to-consumer shipping lives under one pound. Ounce-based pricing is what kept those shipments economical” because prices only increased incrementally, said Beth Guynn, a small parcel consultant who recently joined the startup courier company Gofo as director of national accounts for North America, on LinkedIn. Shippers that don’t want to absorb the increase can switch to a carrier that still prices by the ounce, she suggested.
The price moves are part of the Postal Service’s 10-year modernization plan. Postmaster General David Steiner has made revenue growth a priority, saying that cost-saving measures aren’t sufficient to restore the organization’s financial health.
“It is important for all users that the USPS grows its parcel business because it would help its overall financial situation, and reduce pressure to increase prices on the monopoly (mail) side of the business. Nonprofit organizations have seen compounded price increases since 2021 that range from 47% to105%, which has had a devastating impact on their ability to use mail to accomplish their critical nonprofit missions,” said Kathleen Siviter, executive director of the Alliance of Nonprofit Mailers, in an email. “Despite that level of price increase on mail, the USPS is in a precarious financial position. The USPS is trying to grow the parcel side of its business by leveraging its last mile network, but its parcel volume has declined by 8.1% since October. Today’s parcels price increase announcement would increase commercial USPS Ground Advantage prices by over 11% as well as increasing costs for transporting hazardous materials and increases in other fees. We are concerned these types of changes will make the USPS less competitive in the parcels arena.”
For the first half of the fiscal year, Ground Advantage volume was up 19.5% and revenue grew 23.6%, according to USPS financial reports filed last week, while total parcel volume is down 8.1%.
The USPS also said the price for forwarding and returns under Parcel Select will increase from $3.80 to $6.00. For customers using Address Correction Service with shipper paid forwarding/return, the price will increase from $3.20 to $5.40.
Additionally, new fees will be established to cover the additional cost associated with transporting hazardous materials for Priority Mail Express and Priority Mail, as well as a noncompliance fee for improperly prepared hazardous material items shipped using parcel products.
The Postal Service also said it will update an address enhancement offering through which shippers can validate and correct addresses under a monthly tiered pricing model. And it will align the formula for dimensional weight pieces to industry standards for Priority Mail Express, Priority Mail, Ground Advantage and Parcel Select. Reducing the divisor in the formula will raise shipping rates, which the filing acknowledged “may shift those packages to our competitors in the future.”
Click here for more FreightWaves/American Shipper stories by Eric Kulisch.
Write to Eric Kulisch at ekulisch@freightwaves.com.
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