In September, the United States Postal Service introduced new, lower rates on Priority Mail service for online retailers. On the surface, the change sounds like good news for ecommerce providers’ holiday shipping programs, especially since free boxes may be available and there are no residential,fuel or delivery area surcharges.
But in reality, the new USPS rates may not be as earthshaking as they seem. Ultimately, the new rate complicates fulfillment and it won’t be good news for every online retailer.
What the New USPS Rates Mean for Online Retailers
The USPS rate change has been promoted as a win for online retailers based on the idea that lower shipping rates will reduce costs and improve bottom lines for businesses of all sizes.
But while the new USPS Priority Mail rates will make a noticeable difference for some online retailers, the change is less exciting for others. Here’s what you need to know to determine whether or not your ecommerce brand will benefit from lower USPS Priority Mail rates this holiday season.
Lightweight Packages: The new USPS rates are designed to reduce Priority shipping rates for heavier packages—not lighter ones. USPS marketing materials for the change promised “big savings for packages heavier than 5 lbs.”
Unfortunately, many online retailers (e.g. fashion brands, beauty brands, electronics brands) sell products with sweet spots in the 1-4 lb. range. That means a large number of ecommerce brands won’t see much difference in shipping rates.
Zones: Proximity is also a factor in determining whether or not the new USPS shipping rates will deliver meaningful benefits to your fulfillment program. When compared to UPS or FedEx ground, the new discounts seem to apply primarily to closer zones.
UPS and FedEx are already fairly efficient when it comes to shipping parcels in zones 2 and 3. As a result, the new USPS rates may not be significantly lower. In fact, USPS Priority Mail rates may even be higher, based on negotiated discounts granted without the surcharges.
Surepost and Smartpost: It’s important to remember that UPS and FedEx have already implemented changes similar to the USPS Priority Mail rate change, switching standard service from ground to Sureport or Smartpost, respectively.
UPS and FedEx provide these services in partnership with USPS, typically offering significant savings over ground service rates. This makes the idea of transitioning to Priority Mail even less advantageous for many online retailers.
The USPS Priority rate change isn’t all bad news. USPS points out that the “average” cost of the service will be less expensive than ground, while providing faster delivery. But while it’s possible to reduce transit time if your distribution center is located on a coast, the key variable is weight.
Like any freight-related decision, the data will ultimately determine whether Priority Mail is right for your business. Although you may be able to reduce transit times and lower costs this holiday season, you need to analyze the data to accurately gauge how a change will impact your fulfillment program—keeping in mind that there is always a tradeoff between transit time and cost.
Doug Sternberg is executive vice president of client strategy at Dotcom Distribution.