USPS Priority Mail prices to jump almost 10 percent in January 2016
By Bill McAllister, Washington Correspondent
A year after the United States Postal Service slashed parcel prices for big commercial shippers by as much as 58 percent, it is planning to boost its Priority Mail shipping prices by 9.8 percent.
If approved by the Postal Regulatory Commission, the new prices, announced Oct. 16, will become effective Jan. 17, 2016, and will affect all consumers and organizations that send parcels via the Postal Service.
The USPS sought to minimize the impact of the increases almost a month after the three remaining members of the Postal Service’s board of governors endorsed them in a closed meeting.
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The higher rates represent an effort by the financially troubled Postal Service to get more revenues out of its fastest growing mail segment — shipping services.
Both of its major parcel competitors, FedEx Corp. and United Parcel Service Inc., have publicly warned the USPS that it could risk pricing itself out of some parcel markets, such as lightweight packages, with these proposed sharp increases.
But the USPS attempted to minimize the size of the planned increases by noting that the increases are the first in three years for its commercial Priority Mail products and, if averaged, the increase would be “less than 3.3 percent per year.”
James Cochrane, chief marketing officer for the USPS, told The Wall Street Journal that the agency needs a price increase on its lightweight residential parcels.
With discounts offered big mailers, Cochrane said, the USPS makes only about 1¢ on each lightweight parcel it delivers.
“We need to make more than a penny,” he told the Journal.
Most of the agency’s “core business” is 1- and 2-pound packages, he said.
Priority Mail Express, the overnight delivery service offered by the USPS, will see an overall increase of 15.6 percent, according to the rate notice filed with the regulatory commission.
The current Priority Mail Express flat-rate boxes will be eliminated “because of insufficient volumes,” the notice said. Those boxes currently sell for $44.95, according to the USPS.
Prices for the popular Priority Mail flat-rate boxes will be raised to $6.80 for the small box, up from $5.95; $13.45 for medium boxes, up from $12.65; and $18.75 for large boxes, up from $17.90.
Parcels sent by first-class mail will see a 12.8 percent increase, according to the filing.
Global Express Guaranteed services will increase by 7.1 percent, and Priority Mail Express International will rise by 11.6 percent.
The filing noted at several points that deeper discounts might still be available to mailers through various discounts and negotiated service agreements.
“The parcel rates were expected,” said Gene del Polito, president of the Association for Postal Commerce.
He said postal officials had been warning mailing groups about the increase “for quite some time.”
The executive of another large group of parcel mailers, who spoke to Linn’s on condition of anonymity, said postal officials had briefed his organization about the changes 10 days before they were announced.
Stephen Kearney, executive director of the Alliance for Nonprofit Mailers and a former Postal Service executive, called the new pricing “quite a switch from last year,” when the USPS announced deep price cuts for big mailers.
“I suspect several factors led to the shift,” Kearney told Linn's.
“USPS is very interested in more large, negotiated service agreements with major customers such as Amazon, and raising list prices gives them more room to agree to discounts for contract customers.
“After three years of no price increases, their cost coverage for shipping in general had slipped, so they need higher prices,” Kearney said.
“And UPS has a case going at the PRC [Postal Regulatory Commission] arguing that Postal Service shipping services are not contributing enough to overhead, and these increases should help with that.”
“Finally,” Kearney said, “I wouldn't discount the impact of longtime shipping expert Jim Cochrane taking over the Chief Marketing and Sales Officer role. Jim knows shipping.”
In September, FedEx announced its rate increases — effective Jan. 4, 2016, for most services — will rise an average of 4.9 percent.
UPS has said its average shipping rates will increase between 4.9 percent and 5.2 percent on Dec. 28.
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