Once e-commerce shippers using the U.S. Postal Service plow through the frenzied holiday delivery season, they will face a slew of 2022 rate increases that for some parts of the agency’s shipping portfolio will be significantly higher than current prices.
The Postal Service said Friday that it expects to deliver 850 million to 950 million packages over the holiday season, which runs from Thanksgiving to New Year’s Day. The agency said it will expand its Sunday delivery network, effective Nov. 28, to locations with high package volumes. It expects to deliver more than 9.7 million parcels each Sunday during the holidays.
The Postal Service delivered 925 million packages last holiday season.
It said it has leased 7.5 million additional square feet for the upcoming peak, and has already installed 88 of the 112 package-sortation machines that it ordered as part of a 10-year initiative to position it for more parcel volume. It also plans to have 50 sorting machines operational by the holidays to process large packages. The Postal Service said it will be able to process an additional 4.5 million daily packages once the equipment is in place.
Ho, ho, ho, give us mo, mo, mo!
Parcel users will need to brace for the 2022 rate hikes that will be imposed close to New Year’s. The increases are set to kick in Jan. 9 — two weeks earlier than the usual timetable — once they are approved by the Postal Regulatory Commission (PRC), an independent agency that must clear all rate and service changes. The PRC is expected to approve the increases in their current form.
In a statement earlier this week, the Postal Service said it proposed to raise rates by 3.1% on its Priority Mail Express next-day delivery product and its Priority Mail 2-to-3- day delivery offering. Prices for flat-rate boxes — where a customer pays one rate for as much stuff as can fill up a box — will rise by 60 cents to $1 per piece depending on the size of the box.
In the statement, the Postal Service said the price changes on its shipping services will “vary by product.” An analysis by Nate Skiver, founder of parcel consultancy LPF Spend Management, affirms that point in spades. For example, Priority Mail rates nationwide will rise by an average of 7% for shipments between 1 pound and the maximum of 70 pounds. However, parcels weighing 1 to 5 pounds, still the sweet spot for e-commerce weight, will increase by 5.5%.
Though the year-on-year increase is higher than the 3.4% hike imposed in 2021, it still undercuts the 7.5% increases already announced by UPS Inc. (NYSE: UPS) and FedEx Home Delivery, part of the parent’s (NYSE: FDX) FedEx Ground unit, Skiver said. The UPS and FedEx increases exclude delivery surcharges.
Priority Mail shipments weighing between 11 and 25 pounds, by contrast, will experience marked declines next year, according to Skiver’s analysis. Rates in that weight range will drop 16.1% year-over-year. For shipments transported between 151 and 1,800 miles and weighing 12 to 20 pounds, the average reduction will be 22.8%, Skiver’s analysis found.
Rates will increase by 11.1% on shipments weighing 26 to 70 pounds, Skiver said. He said the hike was unsurprising because the Postal Service, like UPS and FedEx, wants to price out volumes that it doesn’t want in its network because they are too big and bulky to serve efficiently.
Skiver surmised that the price cuts on the heavier Priority Mail shipments are part of the Postal Service’s strategy to go after UPS and FedEx for that business. However, he questioned how much volume in the 11-to-25-pound range would be available to the agency. Priority Mail’s niche is lower-weighted pieces, and the heavier shipments would be too big to automatically drop off, he said.
Elsewhere, rates on the agency’s First Class Package Service, a monopoly product that often moves with first-class mail, will increase, on average, by 7.5%, Skiver said. That is higher than the 5.7% increase imposed for 2021. Shipments in the 1-to-4-pound range will be hit with a hefty 11.3% increase after a 9.8% bump in 2021. The increases are in line with the broader trend of lightweight parcels getting hit with the largest percentage increases, Skiver said.
Rates on the Postal Service’s Parcel Select product, used by large consolidators that aggregate thousands of parcels each day and dump them into the postal network for residential deliveries, will rise 5.9% for 1-to-9-pound parcels tendered at a local post office. Rates for shipments tendered at a “Sectional Center Facility,” which routes parcel and mail shipments between post offices as well as to and from network distribution and transfer centers, will drop 11.8%, according to Skiver’s analysis. Sectional center rates are typically higher than the prices for parcels dropped off at a post office because the volume travels longer distances within the postal network, Skiver said.
He believed the decline in sectional center rates is part of a plan to make the postal network more accessible and incentivize more business to use it.