Will Postal Service parcel rate hikes cause a shipper rethink?

First-class and marketing mail, the traditional cores of the Postal Service, continued their secular declines in 2020, a downward trajectory accelerated by the pandemic. The shipping and package business is currently the lone bright spot, and to capitalize on its growth and offset the costs of processing and delivering parcels, the Postal Service implemented a series of rate increases on shipper-centric products. The increases, which took effect Jan. 24, will reduce, through not eliminate, the Postal Service’s low-price proposition that e-merchants depend on to offer low- or no-cost shipping to end customers.

Will shippers rethink? Most won’t. The difference in price on some of the classes of service is still too high even with the price hikes. Secondly, FedEx and UPS use the USPS for their final mile delivery on their Smartpost and Surepost offerings.

No carrier can profitably deliver to EVERY household in America and these rate hikes only soften the blow. USPS isn’t structured to ever make a profit or have the freedom to do so. With other carriers so reliant on their final mile service and eCommerce booming, we won’t see a mass exodus from USPS volumes anytime soon.