Rather than an across the board increase, the USPS has carefully selected areas where there is room to raise pricing while still maintaining its competitive edge (ie; residential delivery). The USPS is also phasing out Commercial Plus Pricing (CPP to match the industry standard of a single set of published Rates.
Before we jump into the analysis of the pricing changes lets peek at some of the structural changes.
New pricing categories:
- Parcel Select Non-Presort will be renamed “Parcel Select Ground”
- Standard Post will be renamed “Retail Ground”
- Parcel Select Lightweight Machinable and Irregular rates will be combined into a single price table
- Up to $200 of merchandise insurance and $100 of document insurance with outbound Priority
Mail International (PMI) will be offered at no additional charge, except for Priority Mail International Flat Rate Envelopes and Small Flat Rate Boxes
- More country groupings will be added for Priority Mail Express International (PMEI) and Priority Mail International (PMI) flat rate items
- A fee will also be established for the International Service Center (ISC) zone chart for Priority Mail International pieces destined to Canada
Categories to be eliminated:
- Priority Mail and Priority Mail International Regional Rate Box C, and Critical Mail
- Priority Mail Express and Priority Mail Express International Flat Rate Boxes
- First-Class Package Service (FCPS) 3-digit, 5-digit, and ADC presort levels
- Parcel Select ONDC Presort and NDC Presort price categories
- Parcel Return Service RNDC price category
First Class Package Services (FCPS)
- To simplify the FCPS product, the 3-digit, 5 digit, and ADC presort levels along with CPP category will be eliminated
- The 14, 15 and 15.999 ounce offerings that are currently only available as CPP will be consolidated into the “Base” price category
- Overall, FCPS prices increase was announced as 12.8% increase (Base), the average increase is reduced to 8% with the new CPP lanes
Priority Mail (PM)
- On average, the Priority Mail price increased is reported 9.8 percent
- Base is increasing on average 9.4% and is now a flat 13.9% discount off Retail
- CPP Pricing category is maintained, it is the only category remaining that still offers a (CPP)
discount below “Base”, new pricing proposed will be 3% less than Base but is taking a larger increase of 18% in 1-5 Lbs. lanes
- In Sept of 2014, The USPS lowered pricing for PM-CPP significantly in the inner zones from 4 – 40 Lbs. an average of -28.2%, with this increase those same lanes are increasing +35%. A few lanes have increases greater than 100%!
Note: The Regional Rate Box C and Critical Mail will both be eliminated because of low customer usage.
Priority Mail Express (PME)
- Average 15.6% increase
- Commercial Base prices will increase 17.7%
- Commercial Base prices will be set at a flat 10% discount off of Retail prices
- Flat Rate Box will be eliminated due to low volume of usage
- CPP prices as a whole will receive a 48.2% increase to match “Base”
- Deeper discounting may still be made available to customers through negotiated service Agreements
Parcel Select Lightweight (PSL)
This is the service that parcel consolidators use for USPS last mile delivery. This ounce based category is dominated by companies like UPS Mail Innovations, UPS SurePost, FedEx SmartPost, Newgistics, DHL and OSM. While these players have negotiated service agreements that should provide some insulation to the changes, some will likely use this as rationale for additional increases.
- Prices for Parcel Select Lightweight will increase by an overall average of 23.5%.
- Reversing a trend from the last increase, deeper induction will be less impacted (Larger consolidators induct at the DDU level)
- Parcel Select Lightweight “Machinable” and “Irregular” price tables will be combined
- Parcel Select Nonpresort will be rebranded as Parcel Select Ground with a 1.9% price increase
- Parcel Select Origin Network Distribution Center (ONDC) Presort and Network Distribution Center (NOC) Presort price categories will be eliminated
Parcel Select (PS)
- Parcel Select is the pound-based version of PSL above. PS on average will increase 3.1%
- For destination entered parcels, the average price increase is 4.9%
- For non-destination entered parcels, the average price increase is 1.9%
- Parcel Select Non-Presort will be renamed “Parcel Select Ground”
- Parcel Select ONDC Presort and NDC Presort price categories are Eliminated
Here is the cumulative impact of the last three increases to Parcel Select for DDU entry:
Parcel Return Service
- Overall price increase of 5%
- Return Network Distribution Center (RNDC) pricing will be eliminated because of low customer demand, and in order to simplify product offerings
Domestic Extra Service Fees
Unlike the Private Carriers, the USPS does not have accessorial fees, as such, but they do offer some “Extra Services” that the sender may select like “Adult Signature” or “Package Intercept”. These fees will increase 3% – 4%.
First Class Package International Service (FCPIS)
- The overall increase for FCPIS will be 21%
- CPP pricing will be equivalent to Commercial Base
- Deeper discounting will still be made available to customers through negotiated service agreements
Priority Mail International (PMI)
- The average overall increase for PMI will be 10.2%
- Current CPP Customers will experience increases around 24%
- CPP pricing will be equivalent to Commercial Base
- Deeper discounting will still be made available to customers through negotiated service agreements
- Prices for PMI flat rate envelopes and boxes will be further separated into additional country groups
- Insurance will also be offered up to $200 for merchandise and $100 for documents in lieu of weight-based indemnity available under current international exchanges
- A fee is also being established for the International Service Center (ISC) zone chart that is used to determine the applicable Origin Zone for PMI pieces destined to Canada
- The PMI Regional Rate Box C will no longer be available for PMI Regional Rate Boxes
- Extra Service Fees stayed relatively flat
Nobody likes change, but it is a reality we all must adapt to. The growth in competitive “Shipping Services” is one of the shining achievements since the Postal Service’s financial decline that began in 2007 primarily due to declines in First Class Mail volumes and future retiree health obligations due to the PAEA. However, while the USPS’s Shipping and Package Service segment has experienced phenomenal growth, profit margins are significantly less robust than the profitability of First Class Mail. We view the pending 2016 increases as a necessary and important step in the economic recovery of the U.S. Postal Service.
It should be noted that UPS has expended tremendous resources to prove to the Postal Regulatory Commission (PRC) that the USPS is not covering their institutional costs. To date, the USPS has successfully defended their cost coverage formulas; these adjustments will help. Now if Congress can pass some meaningful postal reform, perhaps the Postal Service can arrive at a sustainable balancing point for the foreseeable future.