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Experts Tell Sellers to Get Ready for USPS Rate Hike

Shipping experts say sellers should start preparing immediately for the USPS rate hike that will take effect on January 17, 2016. The Postal Regulatory Commission (PRC) gave the Postal Service the greenlight on Friday for rates that will go up by as much as 23.5% for certain classes of mail that online sellers use to send packages to customers.

Sellers like MysteryTackleBox.com, told EcommerceBytes the rates would be crippling – see Monday’s Newsflash for information about the impact of the 2016 rates on small businesses.

The cost of a stamp and other “market dominant” services are not rising, and the impact of the higher rates vary by class of mail and by package weight – not everyone will see a potentially devastating 23.5% rise in rates. But there’s plenty of misery to go around.

Katie May, CEO of ShippingEasy, said sellers should start planning early. Analyze shipping costs across carriers, zones and weights, she advised.

“Most online shipping software make this easy with comprehensive reporting tools that allow historical analysis across all selling channels,” May said. “If a seller offers free shipping on eBay, can the margins generated on that part of their product catalog absorb the rate increase? If not, will they need to increase their prices?”

Those kinds of decisions are made easier by using real data and analyzing the reports that are readily available through shipping tools, she notes.

ShipRush Product Manager Rafael Zimberoff also advised sellers to get started right away. He too advised sellers to use shipping tools and provided a screenshot showing how online sellers could compare current costs among various services from across shipping carriers (USPS, FedEx, and UPS) using the ShipRush tool. Such tools populate customer address and the package weight and dimensions to get an accurate picture of shipping costs.

Zimberoff said the big deal here is not that Priority parcel rates may go up by a higher percentage than UPS and FedEx – the big deal is that Commercial Plus is being phased out – USPS will eliminate Commercial Plus Pricing altogether at some point in 2017.

Zimberoff said the loss of the delta between Commercial Base and Commercial Plus will impact thousands of ecommerce shippers on shipping systems. “These shippers will feel more of a rate increase than other shippers.”

The USPS is also eliminating the Click-N-Ship Commercial Base discounts used by very small sellers to print online postage. But for savvy sellers, there’s a silver lining if they move to an independent service provider.

Jessica Foth, Endicia Senior Product Marketing Manager, said low-volume shippers moving to an electronic postage provider will benefit from Commercial Base Pricing discounted rates. “They’ll also benefit from access to additional mail classes like First-Class Package Service, which is not available with Click-N-Ship today.”

While online shipping services generally charge a monthly fee, some offer free versions of their software – if they aren’t advertised, sellers should ask – they may be able to continue to receive the discounts they had received using USPS Click-N-Ship – and get some time-saving features as an added bonus.

Foth said with delivery in just 2-3 days, the new USPS rates are still quite competitive compared to Ground services from private carriers – which can take up to 5 days and with their 3-Day options. “It’s worth noting that rates for packages weighing 1-5 pounds are going up an average of just $0.62 per piece across zones 1-8,” she said.

ShippingEasy’s May pointed out that the Postal Service is extending First Class, which is delivered in 1-3 days and offers tracking, to cover packages weighing 13-15.99 ounces. “Today, if something is weighs under 13oz, an online seller will likely choose First Class Mail because no other carrier or service can compete on price with this kind of speed of delivery. This will extend to 15.99oz starting in January 2016. So, for online sellers, this development is very relevant and even exciting.”

However, First Class rates for 1-8 oz packages have been simplified to a common rate vs the per ounce Commercial Base rate card of the past, meaning sellers are paying more for items weighing under 8oz. “These are fairly significant changes for online sellers but still offer the most cost efficient way to ship orders under 1lb.,” May said.

Eric Nash, Senior Director of Online Marketing for Stamps.com, pointed out that private carriers are also raising rates in January. For sellers using Priority Mail with Commercial Base rates to ship packages between 1 – 10 pounds, the average increase is 5.99%. That’s similar to the rate increase private carriers are imposing on Ground packages in January, he said.

He pointed out that UPS and Fedex are increasing their residential delivery surcharges by 15 cents for 2016.

Endicia’s Foth reminded sellers to keep dimensional weight in mind. “Many shippers are just beginning to realize its impact. This is a great time for shippers to evaluate their shipping mix and determine which carrier will be the most economical option while still meeting their customers’ expectations.”

Dennis P. LeStrange, CEO of Neopost USA, recommended sellers adjust their 2016 budgets to accommodate the increase in prices. He also suggested sellers educate themselves about package shipping options. “It’s possible to substitute lower-priced options for the boxes or envelopes they may use routinely,” he said.

ShippingEasy’s May said polybags are a great alternative if appropriate or fitting of the items being shipped.

Janet Lockhart-Jones Curriculum Manager of Postal Education for Pitney Bowes, suggested sellers rate shop to save – “If you put all of your shipping options in one basket, you may be paying more than you have to,” she said.

With both FedEx and UPS imposing Dimensional Weight Rating on all parcels, it’s important to eliminate wasted box space. “Outer packaging should consist only of that which is necessary to properly secure the enclosed items and provide protection during transport. Don’t ship small items in big box. It will cost you,” Lockhart-Jones warned.

You can read more about the USPS rate change here, and yesterday’s Newsflash article has more on the impact on small sellers here.

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Ina Steiner
Ina Steiner
Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). She is a member of the Online News Association (Sep 2005 - present) and Investigative Reporters and Editors (Mar 2006 - present). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com. See disclosure at EcommerceBytes.com/disclosure/.