Be Prepared…Shipping Rates are Going Up Across all Carriers
USPS to Increase Rates January 17th
The Postal Regulatory Commission (PRC) recently gave approval for the U.S. Postal Service to proceed with their proposed price increases and service changes. This means that on January 17, 2016, ecommerce businesses taking advantage of commercial pricing will see an increase in USPS shipping rates and changes to selected service offerings. These changes will also affect hybrid shipping methodologies that utilize the USPS network for transportation, including FedEX SmartPost, UPS SurePost, Mail Innovations and certain DHL services. In addition to passing along the USPS increases, UPS and FedEx have also announced their yearly GRIs (General Rate Increases) affecting both residential and commercial shipping.
It has been three years since the last increase to shippers utilizing commercial pricing. The average rate increase for Priority Mail is 9.8 percent, while the average overall shipping services rate increase (comparable to FedEx and UPS GRI) is 9.5 percent. The USPS did not propose any rate adjustments to First-Class Mail, Standard Mail or its other mailing products, including the Forever Stamp.
The USPS’s average rate changes to specific products include:
Priority Mail – 9.8%
Priority Mail Express – 15.6%
First-Class Package Service – 12.8%
Parcel Select Destination Entry – 4.9%
Parcel Select Ground – 1.9%
Parcel Return Service – 5.0%
Standard Post – 10.0%
Parcel Select Lightweight (PSL) – 23.5
In addition, the USPS will be discontinuing/replacing the following services:
Priority Mail and Priority Mail International Regional Rate Box C
Priority Mail Express and Priority Mail Express International Flat Rate Boxes
First-Class Package Service 3-digit, 5-digit, and ADC presort levels
Parcel Select ONDC Presort and NDC Presort price categories
Parcel Return Service RNDC price category
The Effect on Hybrid Shipping Methodologies
The USPS Parcel Select Lightweight increase will have a trickle-down effect to many other shipping methods. The PSL is the ounce-based category that will affect companies such as UPS Mail Innovations, UPS SurePost, FedEx SmartPost and DHL. Although these carriers have negotiated contract agreements with the USPS that will provide some cushion, the USPS increase will in some amount pass through to all of the above services.
FedEx and UPS General Rate Increases (GRI)
Along with the changes to USPS pricing, FedEx and UPS have announced system-wide general rate increases of 4.9 percent. This is an average rate increase across all ground, home delivery/residential service levels, express and priority shipments, as well as international shipping. FedEx Freight and UPS Freight have also followed-suite with equivalent 4.9 percent GRIs. Of note, B2C shipments have an effective higher increase due to the additional pass thru of USPS increases. Therefore, an e-commerce retailer shipping direct-to-consumer can expect to see effective rate increases typically in the 7 – 18 percent range whereas a retailer shipping B2B will see increases more around the GRI level of 4.9 percent.
The 2016 rate increase for UPS and FedEx is consistent with the 2015 increase. In addition, the USPS is quick to point out that its rate increase, annualized over three years since the last pricing action, would equate to 3.2 percent and fall well below the FedEx and UPS general rate increases. However, it is the cumulative effect of both the USPS rate increase and other carriers GRIs that impacts a broad range of direct-to-consumer e-commerce shipping and makes this year’s changes more difficult to absorb than years past.
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