The U.S. Postal Service is proposing a sharp price increase for its Parcel Select offering — the target of controversial changes that would impact key shipping partners and their customers.
The agency wants rates for Parcel Select to increase by 25% on average on July 14, according to a notice filed with the Postal Regulatory Commission on Friday. The low-cost ground delivery product is used by consolidators like DHL eCommerce and Pitney Bowes, which handle and send customers' parcels to Postal Service facilities for final-mile delivery.
The specific price hikes that Parcel Select users will see depends on where they enter volume in the agency's network.
Parcel Select shipments entered at delivery units, the last stop in the agency's network before a package reaches the end customer, will see the highest increases at 43.4% on average.
Parcels injected further upstream will see less pronounced increases. However, the proposal also calls for nixing ounce-based rates for packages under 1 pound, placing extra pricing pressure on lightweight volume.
Proposed Parcel Select price changes by weight and destination entry
| Delivery unit | Destination hub | Sectional center facility | Network distribution center | |
|---|---|---|---|---|
| 4 oz | +$1.92 | +$2.01 | +$1.45 | +$2.42 |
| 8 oz | +$1.88 | +$1.89 | +$1.26 | +$2.06 |
| 12 oz | +$1.71 | +$1.55 | +$0.78 | +$1.54 |
| 1 lb | +$1.10 | +$0.82 | -$0.30 | +$0.69 |
| 2 lbs | +$0.70 | +$0.72 | -$0.39 | +$1.17 |
| 3 lbs | +$1.11 | +$0.83 | -$0.28 | +$1.01 |
| 4 lbs | +$1.49 | +$0.95 | -$0.17 | +$0.78 |
| 5 lbs | +$1.81 | +$1.10 | -$0.02 | +$0.62 |
Source: U.S. Postal Service
The price hike aligns with the Postal Service’s vision for Parcel Select outlined in its discussions with consolidators. The talks have centered around changes to how they enter volume into its network. Experts have told Supply Chain Dive that the overhaul could spark delays and cost increases for shippers relying on those companies.
The Postal Service has historically benefited from consolidators handling much of the shipping process before entering packages at the delivery unit level. But the proposed changes would result in a significantly smaller cost advantage for consolidators introducing their volume at those facilities.
That advantage loss is exactly what the Postal Service wants. The agency said in the filing that it "no longer intends to incentivize parties to aggregate mail volume from multiple shippers and bring such volume" to delivery units. Instead, it's pushing consolidators to bring packages further upstream in its network, making more efficient use of its processing and transportation capacity.
The Postal Service doesn’t seem to anticipate reaping the 25% average increase in full, however. As a result of the price hikes, the Postal Service expects Parcel Select to bring in 1.5% more revenue in fiscal year 2025, which begins Oct. 1. At the same time, it anticipates Parcel Select volume to decline by 2% over that period.
Major shippers and consolidators using Parcel Select negotiate with the agency for lower rates, Onrout founder Jonathan Hessney noted in a LinkedIn post. That means at least some users will continue to benefit from large discounts, minimizing the rate increase's impact.
But Hessney added that smaller consolidators may start looking for alternative delivery providers if the Postal Service is stingy with discounts.
In its filing, the agency also called for USPS Connect Local prices to increase by 15.9% on average. It is not proposing any price increases for its Priority Mail, Priority Mail Express or Ground Advantage offerings.
The proposed adjustments were approved by the Postal Service's Board of Governors last week. The Postal Regulatory Commission will review the changes before they are slated to take effect, according to a news release Friday.
