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The Postal Regulatory Commission (PRC) recently gave the green light for the U.S. Postal Service® to proceed with their proposed price and service changes for next year. This means that on January 17, 2016, ecommerce businesses will see an increase in USPS® shipping rates and changes to some service offerings.
UPS® and FedEx® will also raise rates on December 28, 2015 and January 4, 2016, respectively. So, online retailers will be impacted regardless of the shipping carrier they use.
Despite the fact that some USPS shipping rate changes may at first glance seem drastic, in most cases the USPS is still the best value for ecommerce businesses shipping lighter-weight packages.
The January 2016 rate changes represent the first price increase for commercial USPS Priority Mail® in over three years. So, although the average price increase for Priority Mail looks high at 9.8 percent for 2016, that averages out to less than 3.3 percent per year since the last rate increase. And with delivery in just 2-3 days, the USPS offers rates that are still very competitive compared to Ground services from private carriers — which can take up to 5 days for cross-country delivery.
Here’s a quick overview of some of the changes you’ll see with the January 17, 2016 USPS price change:
- Commercial Plus Pricing (CPP) discounts are being eliminated or greatly reduced to be brought within 3 percent of Commercial Base Pricing (CBP).
- A new label layout will be implemented for international labels and for domestic labels that require an integrated customs form (like APO/FPO and U.S. territories).
- Standard Post™ will be renamed Retail Ground, and Parcel Select® Nonpresort will be rebranded as Parcel Select Ground.
- First-Class Package Service will support weights up to 15.99 ounces for Commercial Base shippers, versus only up to 13 ounces in 2015.
Here are a few noteworthy rate changes you’ll see. Keep in mind that if you’re an Endicia customer, you’re most likely using Commercial Base pricing. The information below reflects average changes, so actual costs will vary.
First-Class Package Service (FCPS)
In 2016, First-Class Package Service Commercial Base pricing will see an average increase of 7.6 percent, equating to an average of $0.13 more per package. First-Class Package Service Commercial Plus pricing will be eliminated in 2016, but the weight options that were exclusive to Commercial Plus pricing (14, 15 and 15.99 ounces) will now be available to all Commercial Base shippers.
Priority Mail (Zones 1-8)
Overall, Priority Mail Commercial Base pricing will see an average increase of 2.4 percent for Zones 1-8 in 2016, equating to an average of $1.01 more per package.
Priority Mail Flat Rate®
Additionally, postage rates for Priority Mail Flat Rate boxes and envelopes are going to increase across the board in 2016, with increases ranging from $0.40 to $0.85 per piece.
Priority Mail Regional Rate® Boxes
Postage for Priority Mail Regional Rate Boxes A and B will increase for most zones, while Priority Mail Regional Rate Box C will be discontinued in 2016. Box A (Zones 1-8) will see an average increase of 10.1 percent, equating to an average of $0.71 more per package. Box B (Zones 1-8) will see an average increase of 5.1 percent, equating to an average of $0.48 more per package.
Priority Mail Express® (Zones 1-8)
In 2016, Priority Mail Express Commercial Base pricing (Zones 1-8) will see an average increase of 42.1 percent, equating to an average of $38.36 more per package.
Additionally, the Priority Mail Express Flat Rate Box will be eliminated due to insufficient volumes.
Priority Mail Express Flat Rate Envelopes will see an average increase of $2.55 per package.
Parcel Select Ground (currently known as Parcel Select Nonpresort)
Aside from the renaming of this service from Parcel Select Nonpresort to Parcel Select Ground, the rates are the key area of change for this mail class. The Parcel Select Ground rates will decrease on average by 7.7 percent, which equates to an approximate average $2.85 decrease per package. Packages in the 1 to 5 pound range, however, will see a minor average increase of $0.019 or 0.8 percent per piece.
It’s interesting to note that for packages going to Zones 1-4, Priority Mail Commercial Base is generally still the cheaper or equally priced option, with delivery likely faster than Parcel Select Ground. And for Zones 5-8, Parcel Select Ground is only a few cents less than Priority Mail. However, Priority Mail is typically delivered in 2-3 days, instead of Parcel Select’s 2-9 days, providing a better customer experience for what is still an economical price.
For packages weighing 2 pounds to 3 pounds, Priority Mail is the most cost-effective option for ALL Zones.
Priority Mail International®
The Commercial Base price for Priority Mail International to Canada is increasing by an average of 12 percent per package, which equates to an average increase of $13.17 per package.
For packages weighing 5 pounds or less, Commercial Base rates on average are going up 12.8 percent or $5.63 per piece. For packages 5 pounds or less going to Canada, Commercial Base rates will increase an average of 11.5 percent or $4.02 per piece.
Commercial Base pricing for Priority Mail International to all other countries will increase by an average of 12.8 percent per package, equating to an increase in the average price per package of $17.05.
Priority Mail Express International®
Commercial Base pricing for Priority Mail Express International will increase by an average of 15.9 percent per package, equating to an increase in the average price per package of $27.29.
First-Class Package International Service®
Commercial Base pricing for First-Class Package International Service will increase by an average of 28.2 percent per package, equating to an increase in the average price per package of $4.98.
Keep in mind that these changes are only for shipping services, the changes will not affect First-Class Mail® or any other market-dominant USPS product such as the cost of a stamp.
So, what should online retailers do to stay ahead of FedEx, UPS and USPS price changes?
For starters, plan now. Ecommerce businesses should develop a solid understanding of their selling and shipping margins, and take a look at the different costs across all the carriers.
Online retailers need to keep in mind that Commercial Base discounts will disappear from the USPS website. Click-N-Ship® is making the move to Retail rates, which means low-volume shippers moving to an electronic postage provider will greatly benefit from the Commercial Base Pricing discounted rates. They will also benefit from access to other mail classes like First-Class Package Service, which isn’t currently available with Click-N-Ship.
And keep checking our blog for FedEx, UPS and USPS price change updates.