October 15, 2012

USPS' 2013 rate increases would hit e-merchants hard but spare high-volume Priority Mail users

Under the U.S. Postal Service's proposed plan, Parcel Select rates would jump by 9 percent.

By Mark B. Solomon

The U.S. Postal Service's (USPS) proposed 2013 rate increases on shipping services will hit e-tailers fairly hard but take it somewhat easier on high-volume users of the USPS' Priority Mail service. The increases are slated to take effect Jan. 27.

The biggest proposed increase will be a 9 percent jump in the USPS' popular Parcel Select service. Under the Parcel Select service, parcel consolidators or carriers, like FedEx Corp., UPS Inc., and DHL Express, can deliver shipments deep into the postal system and then have the final delivery made by USPS letter carriers. In this way, shippers can take advantage of the fact that by law the USPS must serve every address in the United States.

Parcel Select has grown in popularity as the parcel industry has seen an increase in traffic from online orders shipped from e-merchants to residences. The use of the low-cost postal infrastructure has given many e-tailers the latitude to offer free or very inexpensive shipping to online consumers. As a result, consumers are becoming increasingly accustomed to low shipping fees. According to some industry estimates, three out of every four online orders are abandoned if free shipping isn't promised.

Within the Parcel Select universe, the biggest hit will be a 9.8-percent jump in rates on parcels weighing less than a pound. The mail-order pharmacy business, which ships billions of dollars worth of lightweight prescription drugs each year via this service, would be one of the sectors most affected by this increase.

The proposed changes also include a 6.5-percent increase in the retail price of next-day Express Mail deliveries and a 9-percent jump in the retail price of Priority Mail, where shipments are delivered in two to three days.

However, services for high-volume Express Mail users will only increase between 1 and 2 percent, while increases for users of Priority Mail "Commercial Plus" service will rise by 3.7 percent. To qualify for those rates, a user must make at least 100,000 Priority Mail shipments a year.

The USPS also proposed raising the cost of first-class postage by 1 cent to 46 cents. The Postal Regulatory Commission will review all proposed increases before they take effect.

About the Author

Mark B. Solomon
Executive Editor - News
Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.

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