The United States Postal Service (USPS) filed a notice with the Postal Regulatory Commission (PRC) today of price changes to take effect on January 22, 2023 for competitive shipping services.
Competitive shipping services are typically the most important category of postal services for small business shippers as they cover products and services by USPS that are similar to private carriers like UPS and FedEx.
This includes the popular USPS Parcel Select Ground, USPS Retail Ground, USPS First-Class Package Service, USPS Priority Mail and USPS Priority Express Mail.
The US Postal Services led its public announcement of the PRC filing by stating that there will be no price increase for its Parcel Select Ground service, which offers shippers an economical shipping option with a typical service standard of 2 to 5 days.
But the catch here is that Parcel Select Ground is poised to be eliminated sometime in 2023 and rolled into its First-Class Package Service.
The other package service to be combined next year into First-Class Package Service is USPS Retail Ground. However, for this service, the US Postal Service said in the PRC filing that on average, prices will increase 6.4%.
Furthermore, USPS is also not increasing prices for its new USPS Connect Local service which enables provides small businesses with affordable same-day and next-day delivery options for local customers. This service was launched earlier this year.
So, now let’s look at what is changing by looking at the PRC filing.
The US Postal Service is requesting approval for retail price adjustments from the PRC that would on average raise:
- USPS Priority Mail prices by about 5.5%
- USPS Priority Mail Express prices by about 6.6%
- USPS First-Class Package Service prices by 7.8%
- USPS Retail Ground prices by 6.4%
In addition to the price adjustments, USPS wants to make other changes that may impact online merchants and sellers.
Commercial Base and Commercial Plus
The US Postal Service plans to combine Commercial Base and Commercial Plus pricing for Priority Mail and Priority Mail Express services into one simple discount category named Commercial.
Effectively, many Commercial Base and Commercial Plus prices had been the same for years and most shipping platforms were offering the Commercial Plus pricing to their users already.
However, over the next few years, shippers may still see the label Commercial (Base and Plus) on some USPS documents until the previous terms are no longer in active contracts.
USPS said that in 2023, Priority Mail Commercial rates will increase by 3.6 percent on average.
USPS Priority Mail Flat Rate Prices
For the popular flat rate boxes, the US Postal Service is being a bit sneaky in how it sells the price adjustments, even claiming some prices are going down.
First, let’s take a look at the price proposed price changes on domestic USPS Priority Mail Flat Rate retail prices:
- Small flat-rate box: decreasing from $10.40 to $10.20
- Medium flat-rate box: increasing from $17.05 to $17.10
- Large flat-rate box: increasing from $22.45 to $22.80
- APO/FPO large flat-rate box: increasing from $20.95 to $21.20
- Regular flat-rate envelope: decreasing from $9.90 to $9.65
- Legal flat-rate envelope: decreasing from $10.20 to $9.95
- Padded flat-rate envelope: decreasing from $10.60 to $10.40
At first glance, this looks not bad, even on the services USPS is showing a price increase, the amount is minimal. So, what is the Problem?
The US Postal Service is comparing prices between the current prices in effect during the holiday season which include a 95 cents surcharge per flat rate box shipment, not the ‘regular’ rates that are used during the other roughly nine months of the year.
So, deducting 95 cents from the first price shown for each flat rate price above means that every price is really going up.
In a nutshell, the average price increase for flat rate boxes is actually about 6.5% when one compares apples to apples, not apples to oranges.
USPS Priority Mail Regional Rate Boxes
As we reported in September, the US Postal Service was considering killing Priority Mail Regional Rate Boxes (RRBs).
And in today’s PRC filing, the Postal Service is moving forward with this idea claiming it will “eliminate the redundancy” with Priority Mail Cubic, “save some packaging supply costs,” and further simplify the Priority Mail structure.
Priority Mail Cubic is a special rate aimed at high-volume shippers that meet volume minimums. But small shippers can often access this special rate on shipping platforms that advertise Commercial Plus (now to be called Commercial in 2023) pricing.
The Postal Service further explained its reasoning for eliminating the Regional Rate Boxes by stating:
“While initially successful, RRBs have struggled to gain a foothold in the package market and have not had a clear brand advantage.”
“On the other hand, Priority Mail Cubic has been increasing in popularity and in brand recognition, and we expect most existing RRB customers will utilize Priority Mail Cubic going forward.”
“Priority Mail Cubic offers everything that RRBs do, except for free packaging. If these customers choose not to use Priority Mail Cubic, other Priority Mail price categories remain an attractive alternative.”
New USPS Label Delivery Service
The US Postal Service also revealed it will be introducing a new service called Label Delivery Service.
For a fee of $1.25, postal customers can request return/outbound label delivery to a residential or business address.
“This new service is designed to meet customer needs and provide a convenient option for customers to get labels for their return shipments,” USPS said.
Conclusion – Prices Are Going Up
This shouldn’t come as a shock that USPS prices for domestic and international competitive services are generally increasing, no matter how much the Postal Service may want to spin some of it.
By comparison with UPS and FedEx, which both announced average net increases of 6.9%, USPS price increases appear to be similar.
As is always the case, the details matter and shippers need to look at where price increases may hurt them more.
Even small merchants and marketplace sellers have tools today through marketplaces or third-party shipping platforms to compare prices between carriers.
Diversifying shipping carriers is the best tool for merchants to keep shipping costs in check as much as possible.
Coming back specifically to USPS, the elimination of the Regional Rate Boxes is going to hurt some shippers.
Simply put, this is going to take away another affordable shipping option. And the Postal Service’s assumption that Priority Mail Cubic can make up for this loss is likely not a universal answer.
Also, USPS has been “streamlining” its flat rate box offering by changing package sizes and even eliminating some boxes, further eliminating affordable options for smaller shippers.
Fundamentally, these changes help USPS save some money, and as long as the Postal Service is in the red, this will continue.
BUT there also needs to be a limit on how to present this.
Frankly, the press announcement today was a bit disingenuous comparing flat rate prices between current rates (with peak season surcharges included) and new 2023 base rates. Is this deception really necessary?
As far as the new label delivery fee, that may serve a purpose and could be useful for some merchants offering simplified returns. The UK’s postal service introduced this service a year ago, but at half the price USPS wants to charge.
In addition to these changes highlighted here, the USPS PRC filing included a few more items that may impact some shippers. There is also a full price list of all proposed prices for 2023 attached.
Shippers can read the full filing here. All prices and service changes are subject to final approval by the PRC.
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