Rates for Priority Mail packages shipped via the U.S. Postal Service will go up on average 9.8% on Jan. 17, a move that comes at the same time that private delivery services are also raising rates.
Within the last month, UPS Ground service rates increased on average 4.9% and FedEx by 4.9%.
In addition to the Priority Mail rate hike, the Priority Mail Express prices will rise on average 14.4%, says USPS.
“This is the first price increase in more than three years. Calculated over that three year period, overall the price change averages out to 3.3% per year,” said USPS spokesman Roy Betts.
The price of a one-ounce, First Class letter, currently at 49 cents, will remain the same.
The USPS rise will mostly affect small businesses and some consumers who use the post office’s shipping service.
Many of them “use USPS because it’s economical and most areas have post offices,” said Jarrett Streebin, CEO of EasyPost, a shipping and tracking platform for high volume e-commerce companies.
The rate increase will be good news for UPS, because the post office’s pricing “in some parcel areas eats into UPS and others’ margins,” he said.
The real news is that the post office seems to be closing the gap between the rate it charges smaller customers and the rate it gives customers who ship in volume, which the postal service calls Commercial Base Pricing and Commercial Plus Pricing respectively.
“For a long time, most anyone that wanted it could get Commercial Plus Pricing (volume discounts). Now, they’re closing that gap,” said Streebin. This could help the USPS capture some of the margins that previously had gone to customers who were shipping relatively low volumes but still getting volume discounts, he said.
The number of packages USPS’ Priority Mail service ships has been steadily increasing. In 2013 it was 924 million, in 2014, 934 million and in 2015 it reached 1 billion packages shipped, Betts of USPS said.
Priority Mail revenue have also been rising. For 2013 they were $7.0 billion, for 2014 $7.2 billion and for 2015, $7.7 billion, he said.
Written by Elizabeth Weise of USA Today