U.S. Postal Service Proposes Significant Parcel Rate Hike

The U.S. Postal Service has proposed a 9 percent to 12 percent increase in fees for its parcel select service, which is used by Amazon.com and many other retailers, as well as United Parcel Service and FedEx. The service is the last and typically most expensive step in the shipping process that gets packages to customers’ doorsteps. The USPS is proposing a 9.3 percent increase on this service for packages weighing over one pound and a 12.3 percent increase on lighter packages. These changes, if approved by regulators, will go into effect on Jan. 27, 2019.

Total Retail's Take: As it seeks to remain competitive in the lucrative order delivery business — fueled by the continued growth of e-commerce, which shows no signs of slowing down — as well as provide a much-needed revenue infusion, the cash-strapped USPS has proposed raising rates for its parcel select service (i.e., last-mile delivery). Obviously this isn't welcome news for retailers, as many rely on the USPS for last-mile delivery of online orders. Retailers’ delivery costs continue to increase at a time when free shipping is becoming a standard expectation for online shoppers. For many consumers, if a retailer doesn't offer free shipping, they move on to a competitor that does. So what are retailers to do? Investing in omnichannel fulfillment systems would seem to make sound business sense, as consumers increasingly favor programs such as buy online, pick up in-store, which saves retailers money on shipping costs.

“The move to increase parcel rates points to the fact that the last mile of delivery is still one of retail’s biggest challenges," says Charles Dimov, vice president of marketing at OrderDynamics, a retail order management system. "It's costly, and continues to get more expensive. Now more than ever, omnichannel retailing just makes good business sense. Sixty-nine percent of consumers in the U.S. have tried in-store pickup, and are starting to expect it from retailers. Not only does click-and-collect enable shoppers to get orders faster on their own terms, but it also saves the retailer the cost of shipping. More retailers need to start upgrading their systems to give customers what they want. It helps retailers curb the impact of price increases from the USPS and other couriers. The best part is that it offsets the margin erosion from increases like these.”