Why the USPS Price Increase Will Mean a Challenge for Retailers

In last year's fourth quarter, the U.S. Postal Service proposed a 9 percent to 12 percent increase in shipping fees for all shippers (including FedEx, UPS, Amazon.com), which could impact retailers in a big way. Consumers expect free shipping, but it’s getting harder for retailers to offer. And it’s already tough enough to compete with Amazon.

The proposed 9 percent to 12 percent increase on all shippers’ “last leg” fees is meant to infuse some much-needed revenue into the Postal Service. The USPS also proposed rate increases on stamps, Priority Mail, and Priority Mail Express.

The proposed changes, if approved by regulators, will go into effect on Jan. 27.

In anticipation of a steep rate hike, could retailers pre-emptively dial back free shipping promotions?

What Can Retailers Do?

It’s hard enough to compete online against Amazon, and now retailers won’t be able to pass on the shipping cost increase to their customers. In the age of the customer, consumers literally have unlimited choices right at their fingertips, so they would simply shop on Amazon or wherever they could find the lowest price for the item they were looking for.

However, retailers could look to a premium loyalty program to help offset any extra shipping costs incurred from the USPS price increase. A premium loyalty program provides ancillary revenue, creates elevated customer engagement, and builds brand advocacy. Brands can also help themselves and their customers by enhancing their omnichannel presence. By doing this, brands can seamlessly meet customers at every touchpoint and every moment of truth.

Having a strategic plan to build a coherent, aligned experience across multiple platforms is a great way to engage and retain customers. And getting people back into stores is a way that brands can spark engagement.

For example, Walmart has taken significant strides toward improving its in-store experience. Walmart’s Store Assistant app makes building a shopping list so much easier and faster. What’s more, the app includes a map that's unique to every Walmart store that can help users know exactly where an item is located. For Walmart, the goal of the Store Assistant app is to make every aspect of the in-store experience faster and more convenient.

At The Finish Line, company officials tailor one-to-one experiences based on what customers browse and purchase. Through those personalization efforts, The Finish Line continually creates more meaningful loyalty benefits while maintaining a high level of service.

For example, a key element of the customer experience occurs behind the scenes with the post-purchase experience and returns. Customers expect that process to be as seamless as the pre-purchase shopping experience and, when it is, they appreciate and value that. The Finish Line’s new in-store experience drives more customer engagement and loyalty.

The Finish Line implemented an RFID digital display, whereby customers can view content specific to the shoe they're interested in, which drives a deeper level of storytelling, product information and service. Customers can also try on shoes in front of the company’s SneakerFeed Mirror, which changes the background of the mirror.

While Amazon offers fast and free shipping, competitors can offer buy online, pick up in-store programs that fulfill the customer’s need for instant gratification.

Retailers Can Still Win Despite the USPS Shipping Hike

The added USPS costs might cause retailers to reconsider their shipping policies, and whether they can afford to continue offering free shipping. A focus on premium (i.e., paid) loyalty can help brands offset additional shipping costs. Investing more in value-packed loyalty programs can be an effective way for brands to engage and retain customers.

Paid loyalty programs can even offset some added shipping costs due to the ancillary revenue stream. Furthermore, brick-and-mortar retailers shouldn’t forget about their physical locations as distribution points. Enhance your omnichannel experience to bring more customers back into stores.

By executing against some of these consumer engagement options, brands can stay top of mind with their customers despite potential USPS rate increases.

Tom Caporaso is the CEO of premium loyalty solutions pioneer Clarus Commerce, with over 24 years of experience in the retail, e-business and customer loyalty industries.