On Friday, the United States Postal Service (USPS) proceeded with its request to the Postal Regulatory Commission (PRC) for price increases as part of its 10-year plan for achieving financial sustainability and service excellence. By law, the postal service must first file a notice with the PRC and go through a regulatory process before price adjustments are granted.
The proposed price changes would hike overall Market Dominant product and service prices by approximately 6.9 percent. First-Class Mail prices would increase by 6.8 percent to offset declining revenue due to First-Class Mail volume declines. In the past ten years, mail volume has declined by 46 billion pieces.
Market Dominant products are mailing services over which the United States Postal Service enjoys a legal monopoly and includes mailing services such as letters, postcards, and marketing mail.
“For the past 14 years, the Postal Service has had limited pricing authority to respond to changing market realities. As part of our 10-year plan to achieve financial sustainability and service excellence, the Postal Service and the Board of Governors are committed to judiciously implementing a rational pricing approach that helps enable us to remain viable and competitive and offer reliable postal services that are among the most affordable in the world.”Postmaster General and CEO Louis DeJoy
Unfortunately, there was a report earlier this year suggesting USPS could be looking at further price increases in 2021 and now it seems that is coming to fruition.
The proposed Mailing Services price changes include:
|Product||Current Price||Planned Price|
|Letters (1 oz.)||55 cents||58 cents|
|Letters additional ounce(s)||20 cents||20 cents (unchanged)|
|Letters (metered 1 oz.)||51 cents||53 cents|
|Domestic Postcards||36 cents||40 cents|
|Flats (1 oz.)||$1.00||$1.16|
|Outbound International Letters (1 oz.)||$1.20||$1.30|
Price Increase Impact on Small Business Online and Marketplace Sellers
While the overall averaged percentages may look “reasonable,” there are two significant increases far greater than the averages price mentioned by the USPS. One the post office didn’t even mention in its announcement, clearly aimed at the general consumer, not businesses.
The Flats Single-Piece proposal calls for an increase from $1.00 to $1.16, a 16% increase (shown in table), and the Media Mail proposal adjustment asks for a hike from $3.71 to $4.11, a 10.8% increase (not shown in table) on the base rate.
These proposed increases will significantly affect the profitability of small business owners that utilize the less expensive USPS shipping options to fulfill their orders. While a few cents may not seem much, these add up over time for small sellers with lower value items who need to increasingly offer free shipping to compete with larger sellers and retailers.
This will further allow larger sellers and giant online retailers such as Amazon to take advantage of their market-leading positions and keep small sellers at a financial disadvantage.
But that may not be the end of it. There are some rumblings that the United States Post Office may now look at further price adjustments on products that compete directly with UPS and FedEx.
New Rule Allows for USPS Price Increases Above Consumer Price Index
For years, increases were capped by the Consumer Price Index (CPI), but that changed in November 2020, when the PRC announced new rules on Market Dominant prices. The new rules allowed for above-CPI price increases based on certain factors and allowing the Postal Service more flexibility in establishing prices for mailing services.
“November’s PRC ruling allows the Postal Service higher rate authority in establishing prices for mailing services. Aligning our prices for Market Dominant products will allow us to grow revenue and help achieve financial sustainability to fulfill our universal service mission.”Chief Financial Officer and Executive Vice President Joseph Corbett
The PRC will take public comment on this request until June 28, 2021. The USPS intended effective date for the planned price increases is August 29, 2021. While it may be a long shot, small business owners that will be negatively impacted by these proposed price adjustments can have their voice heard.
To learn more about the price increases and how to participate in providing feedback to the PRC, click on this link. The USPS also has an overview “Pricing Fact Sheet” that explains the price adjustments in more detail.
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