Dive Brief:
- The U.S. Postal Service has proposed peak season rate hikes for certain package delivery services, with the price increases escalating the heavier the package and the farther it travels.
- The planned increases affect the Postal Service's First-Class Package Service, Priority Mail and Parcel Select Ground, among other products. The changes, which will be reviewed by the independent Postal Regulatory Commission, are set to go into effect from Oct. 2 to Jan. 22, 2023.
- The Postal Service said in a news release that the temporary rate increases will help the agency stay competitive during the holidays and cover extra handling costs associated with higher volumes.
Postal Service commercial product peak season rate increases
| Service | Oct. 3 - Dec. 26, 2021 | Oct. 2, 2022 - Jan. 22, 2023 |
|---|---|---|
| Priority Mail | 6.3% | 6.1% |
| Priority Mail Express | 2.2% | 2.1% |
| Parcel Select Ground | 6.2% | 4.2% |
| First-Class Package Service | 8% | 8.4% |
NOTE: The rate increases set to begin Oct. 2, 2022 are proposed.
Dive Insight:
The Postal Service's proposed rate hikes are in line with last peak season’s levels, and they "frankly seem pretty reasonable compared to what FedEx has proposed," Gordon Glazer, a senior consultant and USPS specialist at Shipware, said on LinkedIn.
But the operating environment the agency finds itself in this year is markedly different, as home delivery demand cools from its 2021 highs.
The Postal Service announced the increases one day after reporting a rough Q3 in which it posted a $459 million loss fueled by inflationary pressures. An $85 million YoY revenue drop in its shipping and package category, driven by a 5% volume decline, contributed to the loss.
Package delivery demand for the Postal Service is still elevated relative to pre-pandemic levels, and packages have grown to become a larger share of the agency's volume mix compared to mail. The Postal Service does not anticipate that this mix will return to pre-pandemic conditions, per its Q3 release, elevating the importance of package pricing and delivery service levels.
To improve sortation throughput during the critical peak season, the Postal Service is adding around 120 package sorting units to its network this year, bringing its total to 250 units.
"This, combined with improved operating practices, will make the United States Postal Service your best option to ship your packages," Postmaster General and CEO Louis DeJoy said during prepared remarks at a Postal Service Board of Governors meeting Tuesday.
