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CHARTS: USPS 2020 Price Increase & Impact on Shippers

Gordon Glazer

Gordon Glazer, CMDSM, CMDSS, MDP, MDC is Consultant, USPS Specialist at Shipware LLC. He can be reached at 858-724-0457 or gordon@shipware.com.

By Gordon Glazer, CMDSM, CMDSS, MDP, MDC

Shipware

Christmas has come early for USPS Shippers with a relatively mind 2020 General Rate Increase (GRI) compared to last year. The smaller increase is a direct result of increased market pressures from UPS, FedEx and Amazon insourcing and attributable declines in volume due to the massive 2019 USPS rate increase.

Here are the “Shipper Focused” highlights:

— Proposed effective date is January 26th, 2020

— Commercial Plus Pricing (CPP) and Commercial Base Pricing (CBP) retain identical rate tables for all services.

— Priority Mail (PM) 1-5 Lbs. +2.7%, higher weights avg +6.6%, Cubic +4.8% and Regional Flat Rate +3.0%

— First Class Package Services (FCPS) +2.4%

— Economy “Parcel Select” (PS) 1-10 Lbs. +1.5% compare to last year’s +13.9%

— Economy “Parcel Select Lightweight” (PSL) less than a pound +4.4% compare to last year’s +11.2%

— Parcel Select Ground – Single piece (used for Haz Mat) retains 1.8% discount from PM

— Media Mail +3.4%

— Bound Printed Matter (BPM) Flats +2.3% on piece rate, no change to per Lb. add-on

— Bound Printed Matter (BPM) Packages +1.2% for DDU & 1.9% for DSCF induction

— Parcel Return Service (PRS) +4.9% RDU and 5.3% for RSCF Pickup

— Key Extra Services: Signature Confirmation +1.9%, Adult Signature and Package Intercept +3.9%

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— International Shippers:

+ First Class Package International Service (FCPIS) +9.6%

+ Priority Mail International

+ Canada Groups 1.1 – 1.8 +4.1% Flat Rate Env, +3.9% Flat Rate Pkgs, 1-10 Lb. Pkgs +6%

+ Groups 2-17 +5.2% Flat Rate Env, +5.1% Flat Rate Pkgs, 1-10 Lb. Pkgs +6.5%

+ M-Bag (used by Consolidators) avg +6%

2019 USPS Industry Highlights

— A lot of changes have occurred in the marketplace and there remains the continued stress of no Congressional Postal reform.

— The Postal Regulatory Commission (PRC) completed the required 10-year review of the PAEA (Postal Accountability and Enhancement Act) and came out the other side relatively unscathed, having weathered challenges from UPS to change the USPS’s method for allocating certain fixed costs between Shipping and Mailing products.

— The much-anticipated Presidential Task Force report on the USPS was leaked and revealed very little. One item that did see immediate attention was the claim that the USPS was losing $1B a year due to poorly written Negotiated Service Agreements (NSA) used by specific postage “resellers”.

It is suspected that Stamps.com, upon realizing they would lose a lot of “Service Revenue,” very shockingly pivoted 180 degrees. They publicly blamed the Postal Service for its reduced future earnings and announced they would give up its NSA discount to open their business to competitive vendors.

— Their stock dropped 50% overnight, followed by another 50% drop.

— Fortune has since shined on Stamps due to the calendar and the International “Universal Postal Union” (UPU) uncertainty.

— Industry rumors indicate the USPS has deferred any action till the Q4 Holiday Shipping season is over for fear of disrupting shipping activity during this critical time.

— Speaking of the UPU, that was quite the scare that forced shippers to look for alternatives. Not a bad thing to look around, as many found better deals through International Consolidators.

+ The UPU issue was resolved and the USA will remain.

+ Parity in rates between domestic shippers will soon occur saving an estimated $.5B a year.

+ Bad news for merchants that ship goods direct from China.

Competitive Pressures

— Both FedEx and UPS announced plans to go to 7 days a week delivery.

+ FedEx going a step further with their intention to keep 100% of their SmartPost shipments in-network rather than hand off to the USPS for final delivery. This is no small number – 2MM pkgs per day that may be out of the USPS network by next Sept.

+ Both also released flat rate programs to compete with the USPS Flat rate offerings.

— Amazon persists as the leading market disruptor with plans to take “Prime” to one day transit. They are in a unique position to make it happen due to their massive distribution network. They purchased more planes and 20,000 vans to grow their own Amazon Logistic Services.

— Expedited Economy Services from 2 of the larger consolidators continue to pull business from Priority Mail by offering 3-day transit at competitive pricing. (Note: the USPS still retains revenue for final mile delivery. What is lost is the more profitable, full network, FCPS and PM.)

— Due these competitive pressures, the USPS took restraint this year to help tilt the scale back in their favor.

+ Rate Shopping software often makes routing decisions and helps the USPS when shippers compare their fully laden costs. The USPS does not charge for Fuel, Area Surcharges and many other “Accessorials” that the national carriers add on after the fact.

+ Non-Linear Changes: The USPS raised rates less in areas where they already dominate, and much more in lanes dominated by small users and consumers (heavier – longer transit) that don’t have access to discounted UPS/FDX rates that large shippers routinely get.

Here are some of the increases by service broken down by weight and zones.

First Class Package Services (FCPS)

— First Class Package Services (FCPS) +2.4%

— 5-year cumulative increase last year was +31%, this year’s lower increase pulled it down to +26.2%

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Priority Mail (PM)

— Priority Mail (PM) 1-5 Lbs. +2.7%, Higher weights averaging +6.6%, Cubic +4.8% and Regional Flat Rate +3.0%

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Parcel Select (PS and PSL)

With the continued growth of e-Commerce and “free” shipping, e-tailors favor economy shipping options. A majority of these are inducted via Parcel Select, although many will not recognize the name. They’re better known by their popular brand names like UPS SurePost, UPS Mail Innovations, FedEx SmartPost, Pitney Bowes Newgistics, International Bridge, 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.

— Important to realize that Consolidators uses these programs differently, with some offering as many as 3 service levels. It is possible to get 2-3-day transit times and compete with FCPS and PM

— Economy (PS) “Parcel Select” 1-10 Lbs. +1.5% compare to last year’s +13.9%

— Economy (PSL) “Parcel Select Lightweight” Under a pound +4.4% compare to last year’s +11.2%

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New Beginnings

The new year provides time and opportunity to fine tune your shipping program. It will be a good time to look for savings by examining routing logic, review carrier contracts and network with industry peers. Savvy shippers understand their distribution profile is unique to them and that rate changes impact each differently. We recommend Shippers analyze future impact of all carrier rate increases to get out in front of the changes and mitigate cost increases by shopping. Ask your freight auditing company or outside consultancy to help you.

Feel free to reach out to me with questions or to ask for help. Wishing you great shipping success.

Gordon Glazer, CMDSM, CMDSS, MDP, MDC is a Senior Consultant, USPS Specialist at Shipware LLC, an innovative parcel audit and consulting firm that helps volume parcel shippers reduce shipping costs 10%-30%. Gordon is a postal industry veteran with 33 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 gordon@shipware.com.

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