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Thu Nov 11 2021 20:52:56

Why USPS Rate Hike Feels Like a Broken Promise

By: Ina Steiner

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After the USPS announced Wednesday it would raise rates in January, we've been getting questions from sellers: didn't the USPS promise *not* to raise rates in January? It's a valid question since the USPS rate hike will hit some online sellers hard: Priority Mail prices will increase an average of 2.7% (Commercial Base), and First Class Package Service prices will increase an average of 7.4% (Commercial Base), for example.

One reader said, "I saw the news about the January postal increase; what happened to their promise from last summer that in order to ease the blow of twice-yearly increases there would be no increase in January? Was it all a lie?"

Another EcommerceBytes reader said, "Didn't USPS recently announce that rates would be increasing twice a year, but NOT in January 2022? I'm just about positive I read that."

Sellers are not imagining it - the USPS *did* promise not to raise rates in January - but it was referring to Market Dominant rates. The announcement yesterday about January's rate hike applies to Competitive rates.

Market Dominant rates include the cost of a stamp, First Class Mail, and Media Mail, while Competitive rates apply to Shipping services such as Priority Mail.

Making things even more confusing: the USPS moved First Class Package Service (FCPS) from the Market Dominant class to the Competitive class, keeping the "First Class" name normally associated with Mail.

Information about the new schedule for USPS rate hikes for Market Dominant services is found in this EcommerceBytes article from September. It was a good news-bad news announcement: There won't be a rate hike in January, but thereafter, the USPS will raise Market Dominant rates twice a year, each January and July, with the next rate change scheduled for July of 2022.



Comments (19) | Permalink

Readers Comments

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by: COVID-19 This user has validated their user name.

Fri Nov 12 05:29:41 2021

If it ain't broken , it ain't the USPS.

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This user has validated their user name. by: Rexford

Fri Nov 12 08:29:48 2021

On Pirateship, more and more the price to ship a package weighing over 1 pound is coming up cheaper to ship using UPS than USPS.

Your loss USPS.  

(And why is DeJoy still there?)  

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This user has validated their user name. by: iheartjacksparrow

Fri Nov 12 11:56:12 2021

Someone needs to tell DeJoy that a good (if not substantial) portion of the items being mailed are from online sellers. No one uses the post office unless it's absolutely necessary. Everyone I know has their recurring bills (gas, mortgage, etc.) set up for automatic payments right from their bank accounts. Outside of items that I ordered online, all I get in the mail is stuff that goes straight to the recycling bin. So instead of encouraging people to use the post office, he's turning people away with the constant postage increases which does nothing to help the service the customers are receiving.

I sell collectibles, so there will always be a market for them no matter the cost of postage. But I fear that a lot of people will be forced to stop selling online because the postage rates are becoming out of control.

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by: Snapped This user has validated their user name.

Fri Nov 12 14:49:13 2021

It seems that much of what constitutes ‘feelings’ in this thread’s context stems from public misperception of the difference between competitive products, to which the Jan 6 increase doesn’t apply, and market dominant products, like regular mail and certain classes of parcels not offered by other shipping carriers.  

Perhaps the USPS for their part can place more emphasis and clarification on that aspect (due credit to the OP which did), when they make these announcements.  At least folks will have clearer facts upon which to base their displeasures.

As already noted, and as is clear even to the USPS, market dominant (1c Mail) volume has decreased significantly even as:

From the FCC’s “Eighth Broadband Progress Report” -
“ ..the Report finds that approximately 19 million Americans—6 percent of the population—still lack access to fixed broadband service at threshold speeds.  In rural areas, nearly one-fourth of the population —14.5 million people—lack access to this service.  In tribal areas, nearly one-third of the population lacks access. Even in areas where broadband is available, approximately 100 million Americans still do not subscribe.”

That volume that still needs to be served at ‘pre-‘modern’ levels, who don’t ‘transact’ online, but not necessarily precluding mail order eCom, isn’t likely to change much near term.  

Meanwhile, Business Bulk Mail (BBM) volume has increased at almost the same pace - and not all (also rising) on-line enticements are made on-line.  In fact, the USPS is smack in the middle of their typically heaviest ‘catalog volume’ season leading up to the holidays.  Credit offers, pizza menus, insurance hypes, coupons, weekly Red Plum ads, and a host of ‘every door’ direct mail (EDDM) ads folks like to mag clip to their fridge doors - they don’t charge enough for those really.  And they exist year round.  

No defense for DeJoy (undeserving), but with transport (supply chain pressure assisted) costs increasing while assets are diminished, plus inflation with volumes also manifesting in increasing labor costs, and with that unnecessarily burdensome congressional mandate to fund great-grandkid USPS retirements, his attempts to reduce mail stream pressures seem to be enough to temporarily at least stay his ouster by the PRC.  Even as they remain clearly unpopular and illogical to John and Mary Q Public.  Even as DeJoy’s COI questions remain.  

Concerning is an understatement there, verily.

As also noted, even as market dominant issues exist, they are by sheer volume impacts still not as concerning as the competitive market product prices and performance issues that are driving most of the ill will.  Not helped by this latest ‘reminder’ of post holiday increases even if those aren’t impacted.

A few things to bear in mind though, prior to raising a fist.  

The USPS visits every house daily.  Nobody else’s infrastructure does or can yet do that.  And if they were to, USPS increases would be minuscule compared to what would happen to ‘competing’ ship costs then.

So, that UPS ‘that’ll show ‘em’ choice?  If it’s under a couple lbs, it is likely to be handed off to your local PO, and they get paid about 1/2 what you paid to UPS.  Because the UPS can’t perform alone what they promise for what you pay.  However, the USPS can do it - and does it - cheaper.  Thus, you get the benefit of what UPS may charge (less) to compete.  It’s not the other way around.  Ironic, no?

Also, UPS isn’t ‘faster’ per se’.  They can just get the biggest chunk done so, because they don’t have a whole mail stream in which it is also embedded.  So, it effectively may ‘arrive’ that much sooner to the delivery PO - thus bypassing DeJoy’s ‘cost savings’ pit stoppages that ‘delay’ transit time.  

That can be extrapolated for FedEx, DHL, and despite their explosion of effort, Amazon (Parcel Select class) too.  

One thing’s likely though.  Given all the uncertainty of what the next 6-7 weeks may bring ‘logistically’, Jan 6 may be a day worth actually looking forward to, to be past it all.  Or at least, Jan 5.

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by: I Must be Crazy This user has validated their user name.

Fri Nov 12 15:04:13 2021

I am making the strategic decision to discontinue offering free shipping to my buyers. I think that most people realize the free shipping is not really free and must be accounted for in the price.

Also moving away from free returns. I think it encourages buyers to be careless in their ordering. The round trip costs on those can erase margins on larger items and in total account for over 15 percent of my total shipping costs.

These increases two times a year are becoming difficult to keep up with. Prices cannot be increased to accommodate the increased shipping costs. Postage is the single highest line item on my P&L; higher than inventory costs. This way I can set my price, while letting the buyer pay the calculated rate. As those prices move the rate is automatically adjusted based on the buyer's location.

Being in California, I need to account for the possibility that an order might go to the southern tip of Florida or to Maine. By building the cost into the price, my items are less competitive here in my home state, and more competitive cross country. That is inefficient.

I have already begun making adjustments to existing listings and pricing new listings under the calculated shipping model. Right now I see no difference in activity.

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by: Snapped This user has validated their user name.

Fri Nov 12 17:18:39 2021

“ public misperception of the difference between competitive products, to which the Jan 6 increase doesn’t apply, and market dominant products,”

Should read the other way. (See? Cornfusing..).  My bad.

…to which the Jan 6 increase APPLIES….

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by: UB This user has validated their user name.

Sat Nov 13 08:43:17 2021

After reviewing the rates that start Jan 9th. The current commercial rates do not change. Basically, they are just making the temporary rates now permanent. Example, current commercial rate 1st class package zone 1 is $3.76 which will be $3.76 on Jan 9th and so on. USPS Retail Ground is actually decreasing by over 6%.  Also, glad to see they are launching USPS Connect Local nationwide which will definitely increase the amount of packages for USPS in certain areas thus more revenue.

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This user has validated their user name. by: Rexford

Sat Nov 13 08:46:49 2021

And there is this:

The fundamental problem is that while the USPS generates enough revenue to cover its operating costs, its pension and retiree health care liabilities push its bottom line into the red. The USPS has operated at a loss since 2007. From 2008 to 2018, it reported $69 billion in losses. For the 2019 fiscal year, it lost $8.8 billion on $71.1 billion of operating revenue.

Unless this is fixed expect more losses and price rises to continue.

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by: UB This user has validated their user name.

Sat Nov 13 10:10:32 2021

@redford. Most of all those losses are paper losses and not actual cash losses. Change of rates on WC, prefunding requirements and retiree assumptions.  

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by: 4yourinfo This user has validated their user name.

Sat Nov 13 23:26:00 2021

I love the buyers who make 10.00 offers plus free shipping for my 3lb items! People have absolutely no idea the cost of shipping! Do they think I have some kind of deal with the carrier that I get  to ship any package out for free?? The shipping industry is getting extremely greedy which may eventually lead to their demise. They are destroying ecommerce.. Brick and mortar stores were thought to have seen their end - these rate hikes are giving them lots of future.  

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by: Snapped This user has validated their user name.

Sun Nov 14 04:04:26 2021

“ Do they think I have some kind of deal with the carrier that I get to ship any package out for free?? ”

Yes.  Because all the ‘venues’ now disadvantage visibility for seller listings that by comparison do not declare shipping to be “free”.  Or rather, FREE!!

So even if you don’t, sacrificing misleading brainwashed advertising for transparency and truth, it’s less likely you are able to expose and perhaps educate a buyer to the cost realities of the logistics needed to fulfill their ‘30 min or less’ lifestyle-entitled expectations.

Only took about a decade or so.  They should be proud.  

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by: Eagle This user has validated their user name.

Mon Nov 15 00:45:31 2021

They should realize that raising rates doesn't equate into bring in more $$$. With the inconsistency of delivery times, the cost getting closer to charges set by UPS and FedEx the more customers will side with UPS and FedEx because at least with those carriers they normally deliver when they say they will. It's a known fact since Ryan was head of the House that Republicans have wanted to sell off USPS to a 3rd party. This is only opening the door. If and when that does happen all of the independent carriers will be raising shipping costs considerably. With DeJoy owning stock interests in other carriers it only makes capitalist sense to try and crash USPS to hopefully force USPS customers on to other carriers and raise stock prices. I don't know about the rest of you out there, but I felt USPS was running consistently the best it had since I started my business in 2002. Every since Trump assigned DeJoy to destroy sorting machines, pull stand alone drop boxes, and slow down the mail with hopes of ballots not being delivered on time USPS has been nothing but a Cluster F#ch as to scheduled deliveries and price costs. He calls it his 10-year plan, but I guarantee it's not going to take 10 years to totally kill USPS

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by: Chicago48 This user has validated their user name.

Mon Nov 15 07:10:07 2021

@Rexford:  Mercari offers UPS Surepost and Fedexpost, which is a slow ship to China, but still cheaper than Priority mail.

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by: Chicago48 This user has validated their user name.

Mon Nov 15 07:15:20 2021

@iheart: No one uses the post office unless it's absolutely necessary. Everyone I know has their recurring bills (gas, mortgage, etc.) set up for automatic payments right from their bank accounts. Outside of items that I ordered online, all I get in the mail is stuff that goes straight to the recycling bin.
^^
Right.  I wrote our congress people and Postmaster.  The USPS in my neighborhood went and retooled the mail boxes so that we can only slip in a 1 oz letter.  We used to be able to slot in a small priority box, no more.  So that means we have to trek to the POST office and mail our packages.  It won't make a difference, the mail boxes are NEVER filled with letters and post cards.  NEVER.  
DeJoy & the Board have no clue what's going on with small businesses and resellers.  NONE.
Luckily I live in walking distance to a UPS store, a UPS drop box, Fedex drop off, etc. and I'm mailing more and more packages through UPS/Fedex.

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by: Mark4 This user has validated their user name.

Mon Nov 15 11:39:42 2021

Every single package we have shipped for the last week that weighs more than 1 lb has been cheaper UPS.  We no longer will be shipping priority mail, USPS has priced themselves out of the market.  

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by: Stone Cutter This user has validated their user name.

Mon Nov 15 13:45:12 2021

It was stupid for USPS to promise anything. And since this past summer we now have inflation; without enough workers for job listings, while I read that USPS employees are working longer hours then ever and are being paid 1.5x their hourly wage when working overtime.....IT'S ALL ABOUT INFLATION.

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by: Stone Cutter This user has validated their user name.

Mon Nov 15 13:50:49 2021

@Mark4
Besides pricing, I will always stick to USPS because consumers have dedicated mailboxes for USPS mail unlike UPS who leaves products on doorsteps. I sell jewelry. I do not want a box worth $600 left on any doorstep as "porch pirates" have become a huge problem. I don't mind paying extra for that type of security.  

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by: Chicago48 This user has validated their user name.

Mon Nov 15 14:58:50 2021

@Marie: Besides pricing, I will always stick to USPS because consumers have dedicated mailboxes for USPS mail unlike UPS who leaves products on doorsteps. I sell jewelry. I do not want a box worth $600 left on any doorstep as "porch pirates" have become a huge problem. I don't mind paying extra for that type of security.  
^^
Never had a package stolen or complaint with UPS/Fedex.  And besides, they offer "signature" confirmation just like the USPS.  And I get insurance with UPS/Fedex and have filed a couple of insurance complaints for broken articles and always always got paid.  Not so with USPS.  They just denied a claim.  If I have something valueable I always go UPS/Fedex.

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by: Stone Cutter This user has validated their user name.

Mon Nov 15 16:22:43 2021

@Chicago48
Who's Marie??
Fortunately, I've never had a package lost or damaged when using USPS. When Etsy sellers on the forum say their packages have been damaged in transit, the best advice from sellers is to do a better job packing merchandise. And this is what I do, I always pack with strong boxes with a 200 lb crush test.

And when it comes to signature confirmation, my customers never want that. They just want their boxes left in their P.O. Box. And this is why the P.O. Box is so important to me.



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