USPS rolls out proposed Shipping Services price increases for 2012

Even though the United States Postal Service (USPS) reported a $5.1 billion net loss for Fiscal Year 2011, its Shipping Services unit turned in a strong performance.

USPS Shipping Services was up $530 million—or 6 percent—in 2011 and was spurred by growth in its Parcel Select and Parcel Return Services. And with this week’s announcement that the USPS is upping Shipping Services prices by an overall price change of 4.6 percent, this USPS unit could be in decent shape for a solid Fiscal Year 2012, too.

USPS officials said that prices for Priority Mail and Express Mail will increase by an average of 3.1 percent and 3.3 percent, respectively, and added that the Postal Regulatory Commission will review the prices before they take effect on January 22, 2012.

On the Shipping Services side, including Parcel Select prices will increase on average by 8.5 percent, with destination entered parcels to see an average a 7.6 percent for parcels entered at a destination delivery unit (DDU), 7.8 percent for parcels entered at a destination plant (DSCF), and 6.8 percent for parcels entered at a destination Network Distribution Center. Parcel Return Services will have an overall price increase of 4.6 percent. And First-Class Package Service, which was formerly known as First Class commercial parcels and is now also a Shipping Services product, will see rates increase by 3.7 percent.

First-Class parcels are one of the fastest-growing segments of the USPS, with Fiscal Year 2011 volume up 6.5 percent year-over-year at 638.0 million parcels and revenue is up 9.7 percent compared to the same point last year. 

Along with the announced price increases, the USPS said that also on January 22, 2012 it will roll out the Express Mail Flat Rate Box, which will enable shippers to ship a box—weighing up to 70 pounds—anywhere in the U.S. for one price, $39.95. This box is for USPS customers needing overnight service for items larger than what can be placed in an Express Mail Flat Rate Envelope, said the USPS.

And Commercial base Priority Mail pricing will now also include a new and larger Regional Rate Box C, which is 12” x 12” x 15,” and First Class Package Service rates will rise overall by 3.7 percent.

In an interview with LM, USPS Vice President, Domestic Services, Gary Reblin said that the USPS will be moving various types of under 1 pound packages from Standard Mail into Parcel Select, a package delivery service geared towards large shippers, so the USPS will have not only a Regional Parcel Select product but also an under 1-pound Parcel Select product on the Competitive side.

“This increase was a little larger, and the reason was just that the prices averaged under $1, with the USPS providing the last mile,” said Reblin. “With prices under $1, even a nickel increase is 5 percent so it is not a huge increase although it sounds like more percentage-wise.”

On the USPS Competitive Products side, which includes Priority Mail, Express Mail and Shipping Services, the USPS, by law, can increase rates by as much as it wants at a value-based price, based on factors like the markets it wants to be in to competitors’ pricing to where it thinks the elasticity’s are in the market place.

“All of these things determine prices,” said Reblin. “We do an in-depth study of products and service and where we want to place everything in order to come up with these prices. And we really tried to put an emphasis on keeping the price increase moderate, given everything we believe is still happening in the economy. We like the signals with e-commerce, with some industry estimates pointing to 15 percent growth in e-commerce for the 2011 holiday season. The signals are good and we think we can really set ourselves up with growth if we price reasonably and competitively. These are really moderate increases, considering the increases in fuel costs we have seen in the last year, as well as other factors.”

AMFS Vice President, EMEA, Doug Caldwell, told LM that these price increases overall are fairly low compared to what they could have been, and he added that the USPS remains the only carrier that offers less than 1-pound rates by ounce in the First-Class parcel category, “which is a good deal for shippers of lightweight parcels.”

And he added that overall the USPS rate increases come in lower compared to FedEx and UPS’s increases.

Earlier this year FedEx announced that FedEx Express shipping rates would increase 3.9 percent for U.S. domestic export and import services and FedEx Ground and FedEx SmartPost price changes will be rolled out by the end of 2011. UPS recently announced that non-contractual 2012 rates will be comprised of a net increase of 4.9 percent for UPS ground packages and a net increase of 4.9 percent on all UPS air services and U.S. origin international shipments.