The Real Impact of USPS' Proposed Increases in Parcel Prices
USPS is considering a significant price increase that could have ripple effects across the entire shipping industry. The basic proposed changes are as follows:
- 10% Increase on First Class Stamps: This price increase, which would make a single first class stamp cost $.55, represents the largest increase (on a percentage basis) in over 30 years.
- 9-12% Increase for "Parcel Select" Packages Weighing Over 1 Pound : This particular shipping option is often used by massive online retailers, such as Amazon.
These two pricing changes have major implications for both big retailers and individual shippers alike.
Implications for Amazon
We're on the verge of a peak holiday shopping season that, in all likelihood, will make all others pale in comparison. Some even say it has already started. These price increases, particularly with regards to retailers such as Amazon, will be applied at a time when USPS projects to be delivering over 15 billion packages - many of which will be coming from retailers such as Amazon. As has been pointed out by the current US administration, USPS has played as the "delivery boy" for Amazon. Hyperbole, no doubt. But, there are shades of truth to it. USPS ships up to 40-45% of Amazon's packages. To put that in perspective, Amazon ships over 1 billion packages each year. Amazon is, by far, the largest online retailer. In addition, given the huge increase in orders that happen between Black Friday and Christmas, the cost of this price change is likely to reverberate all the way down to the end-customer.
Implication for Shippers as a Whole
This pricing increase is going to significantly increase the cost that shippers, not just large retailers, pay to deliver packages to their customers. Large carriers such as UPS and FedEx both rely heavily on USPS for last-mile deliveries, and these price increases are targeted specifically at that service. That means that, even if a shipper isn't primarily using USPS for last-mile, it's very likely that their chosen carrier is. Therefore, these changes will filter down to nearly every shipper. An especially daunting prospect given the upcoming holiday season.
What Should Shippers Do?
While the price increases will affect everyone, they will be most apparent to shippers who use USPS directly. Therefore, shippers who ship directly with USPS might want to start evaluating moving towards other carriers such as UPS or FedEx. Increases in costs for shippers are coming from many angles, not just USPS. From higher fuel costs, increasing surcharges, and an overall higher demand for shipping, mitigating costs is becoming an increasingly important focus for shippers. There are 5 potential tactics that can be leveraged in order to mitigate these costs:
