USPS looks to raise rates for packages, too
Postmaster General Louis DeJoy continues an aggressive pricing strategy despite concerns over volume losses.
The U.S. Postal Service is looking to raise rates for package and shipping services by around 6% next year, adding to the ongoing price hikes in the mail.
USPS will increase the cost of its Ground Advantage offering by 5.4%, Priority Mail by 5.7% and Priority Mail Express by 5.9%. Those products are part of the competitive side of its business—offering similar services to those offered by private shippers like UPS and FedEx—giving the agency more flexibility in its rate decisions than it maintains with its government-protected mail monopoly.
The Postal Service highlighted that its pricing is more transparent than that of its competition.
“The Postal Service continues to offer a great value in shipping,” USPS said. “Unlike some other shippers, the Postal Service has upfront pricing and does not add surcharges for residential and regular Saturday delivery, nor fuel. Also, the Postal Service offers convenient flat rate and cubic pricing options.”
The Postal Regulatory Commission ensures competitive products comply with various federal statutes, including that regular mail is not subsidizing the package part of the business, but postal management can generally set prices for those offerings. The new prices are set to go into effect Jan. 21, 2024.
USPS launched Ground Advantage earlier this year, which postal officials have said would make shipping easier and more reliable for mailers while increasing its competitive advantage over private sector logistics companies. The service aims to send all packages in the continental United States within two-to-five days. The product replaced Retail Ground, Parcel Select Ground and First-Class Package Service.
The Postal Service last month announced its fifth price hike under Postmaster General Louis DeJoy, which amounted to a 2% overall hike to rates in its “market-dominant” products.
DeJoy has identified growth of USPS package business as a key driver in putting USPS on firmer financial footing, projecting $1 billion in revenue increase in fiscal 2024. That optimism came despite USPS seeing a volume decline of 175 million packages, or a 2.4% dip, in fiscal 2023. Increased rates offset those decreases and package revenue grew by $324 million, or 1%, on the year. USPS' package business saw rapid growth for many years, but that expansion has cooled since a peak during the COVID-19 pandemic.
“Our goal to remedy this is quite simple: to become the preferred delivery provider in the nation by reducing our cost to deliver market dominant products and use the available capacity such an efficient mission creates, to move increasing package volume in an integrated manner with mail,” DeJoy said on Tuesday.
USPS is still projecting a $6.2 billion overall loss in fiscal 2024, despite DeJoy initially projecting the agency would break even under his 10-year plan in fiscal 2023. Steve Kearney, executive director of the Alliance of Nonprofit Mailers, cautioned that USPS may be setting itself up for failure.
“As discouraging as a planned loss of $6.2 billion is, it is built on the assumption of a major acceleration of the package line which has been dead in the water,” Kearney said. “All signs are for a pricing race to the bottom as package delivery capacity greatly exceeds demand.”
Several groups have warned DeJoy's aggressive pricing strategy is serving to accelerate declines in USPS usage.
"Louis DeJoy’s Delivering for America plan promised that the unprecedented postage increases which have taken place every six months since January 2022 would help USPS regain financial solvency, but they are clearly only triggering a dramatic loss in mail volume and fueling even more debt for the U.S. Postal Service,” said Keep US Posted Executive Director and former Rep. Kevin Yoder, R-Kan.