Changes at the USPS—What do They Mean for Sellers?

Politics aside, there are changes happening at the United States Postal Service that affect ecommerce sellers. The USPS is a cost-effective, reliable service (despite mainstream perception) that people rely on daily—from individuals mailing a single item, to small businesses shipping out small package goods, to large carrier companies leveraging the USPS infrastructure to get thousands of packages to doorsteps for last mile delivery. Here is an overview of what changes have occurred at the USPS this year and what companies and their customers can expect in the next few months. 

USPS 2020 Holiday Surcharge 

This summer USPS announced that they will institute surcharges for commercial domestic packages (including Priority Mail Express, Priority Mail, First-Class Package Service, Parcel Select, and Parcel Return Service). The USPS announcement cites the increase is to keep their services competitive and give them a much needed boost in revenue. This price increase will be effective through the peak season this year. 

While it’s understood that UPS and FedEx have holiday surcharges each year, this is the first year USPS has announced higher rates. Some speculate it’s to counterbalance the lost revenue the service saw this summer or possibly because of pressure from the current White House to raise USPS postage rates. 

Quick facts about the USPS surcharge: 

  • Affects commercial domestic parcels 
  • All competitive packaging services 
  • The cost ranges from 24 cents a parcel up to $1.50
  • Runs from October 18 through December 27, 2020

What does this mean for sellers? Depending on the type of shipping, it may mean slightly higher postage rates, but it’s likely to affect larger companies more. While the surcharges may deter some sellers from using USPS this holiday season, the Postal Service still has one of the lowest cost mail postage rates in the world which is of great value to sellers, particularly small businesses. 

FedEx Discontinues USPS Support for SmartPost 

FedEx has noted that starting this October, they will discontinue using USPS for their SmartPost service. This is a substantial move for FedEx as they relied on the USPS delivery network for the last mile delivery. The SmartPost program will fully remain in place however, the FedEx Home Delivery network will manage all shipments from origin to destination. 

SmartPost parcels will be prioritized behind Home Delivery parcels—any room left in a truck will get filled with SmartPost packages. Experts believe customers are going to see a decrease in transit times initially. FedEx says they will be leveraging the excess room in Home Delivery trucks for SmartPost parcels. For example, if a Home Delivery truck is at 85% capacity, the remaining 15% will be filled with SmartPost, so they’ll likely be delivered sooner. Long term, it should be back to the two to seven day transit interval, which is the normal range.

DCL Logistics Director of Transportation, Jeremiah Pomerleau recommends, “If you’re new to shipping, it might be beneficial to look into the DHL ecommerce and UPS SurePost. For existing SmartPost users, don’t change your carrier immediately. There’s no need to disrupt something that’s working just based on this new information. The companies may decide to pivot again sooner than you can keep up. Ultimately packages will still be getting to your customers in the predicted range.”

USPS Changes and Possible Federal Funding  

This summer there were many operational changes made at the USPS which led to significant mail delays around the country. Changes included leadership restructuring, eliminating employee overtime, removing mail sorting machines, and discarding thousands of blue mail drop-off boxes. While Congress had originally included federal funding for the USPS within a larger stimulus package, the US House of Representatives segmented out USPS funding in a bill they passed in early August. This new bill will give $25 billion in federal funding to the service. 

The bill is currently pending review in the Senate. Many believe it is unlikely to pass there, but there are still talks of adding some funding (likely not as high as $25 billion) to an upcoming economic stimulus bill, which may not pass until 2021. 

Who Uses the USPS?

Truly everyone does, from small businesses to big brands. What makes the USPS different is its reliability—it statistically has the best transit times of any carrier service for domestic small parcel shipping. 

Plus it’s often the more accessible, cost-efficient carrier option for small businesses just getting off the ground. Most data analysis of ecommerce growth in the last decade focuses on the revenue of larger companies and the benchmarks of huge companies like Amazon, Zappos, Warby Parker (same-day delivery, free shipping, easy RMA). What’s missing from that conversation is that a tremendous number of small businesses have started during the recent bull market—and collectively they rely heavily on USPS services to get their products to customers. 

The Postal Service has a huge advantage above other services because it delivers to a wider breadth of zip codes than any other carrier—literally every doorstep in America. In fact other carriers, including UPS, FedEx and DHL eCommerce, rely on the USPS infrastructure for a more efficient and cost-effective last mile delivery. Sellers of all sizes rely on the USPS daily.

USPS Isn’t Going Anywhere 

The current funding issues and politics surrounding operational decisions at the Postal Service are definitely not new. The Postal Service has been around since before the US Constitution, and it’s always been tangled with politicians with various agendas. Sellers need to understand and factor in the new USPS holiday surcharges, but these costs are relatively small compared to other shipping options. The Postal Service is definitely not going away, and companies who rely on it likely won’t see any big operational changes or disruptions. 

The network of USPS offices (there are 31,322 in the US), distribution vehicles, unionized staff, and operational infrastructure is more vast than any other carrier. In 2019 the USPS reportedly delivered 143 billion pieces of mail—that’s over 11 million pieces every month. Although other carriers may come in and out of partnership with the US Postal Service, it doesn’t appear to be going anywhere anytime soon. 

 

If you are looking for support with your domestic ground shipping strategy, partnering with a good 3PL can help. You can read DCL’s list of services to learn more about what we offer, or check out the many companies we work with to ensure great logistics support. Send us a note to connect about how we can help with your transportation and shipping needs. 

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