As they do every year, USPS and all the major shipping carriers have rolled out rate increases and process changes for 2019. But in the case of USPS, this year’s changes are more aggressive than in previous years due to two major factors:

• The overall magnitude of the rate increases, which is larger than prior years
• The scope of process changes, which include a major expansion of dimensional pricing, and a move to zone-based pricing for First-Class Package Service (FCPS).

ShippingEasy’s E-commerce Seller’s Guide to Shipping Rate Changes analyzes the annual changes using the anonymized shipping data that flows through our software. Based on this analysis, below is a review of the USPS changes, their impact on shipping costs, and how sellers can mitigate that impact.

Rate Increases

Our calculations show USPS raised domestic package rates an average of over seven percent. Increases on specific services were generally similar to prior years, with the exception of FCPS rates, which saw a 12% jump.

These numbers are averages across all rate categories. This year, while Commercial Base and Commercial Plus categories will be offered for PME and PM services, the two rate categories will offer identical pricing. USPS will continue to offer a single Commercial rate category for FCPS, with FCPS Commercial packages being limited to no more 15.999 ounces.

FCPS Zone-Based Pricing

The main driver of this year’s FCPS rate increases is the introduction of FCPS zone-based pricing. Historically, FCPS pricing was based solely on weight, regardless of destination zone. Starting this year, FCPS rates consider both weight and destination zone. Our analysis shows that virtually every 2019 FCPS weight/zone combination carries a higher rate than 2018 weight-based pricing.

Despite these changes, FCPS is still the lowest cost way to get packages under one pound to their destination in one to three days. The table below shows how FCPS compares to other options under one pound (comparing the FCPS rate averaged across all weights/zones to the indicated competitor’s rate).

Dimensional Pricing Process Changes

Dimensional weight is the “weight” used to calculate the shipping cost of large lightweight packages. At some point, the cost of shipping such packages becomes driven more by the amount of space they take up than by their physical weight; carriers therefore use dimensional weight to more closely match the prices they charge for large lightweight packages to the costs of shipping such packages. USPS, FedEx, and UPS have historically all used some form of dimensional pricing for packages that meet certain criteria. This year (as of June 24), USPS is significantly expanding its application of dimensional pricing by lowering the dimensional divisor to 166 (from 194) for all Priority Mail and Priority Mail Express parcels shipping to all zones and measuring over one cubic foot (1,728 cubic inches) in volume, which is computed by multiplying the parcel’s length X width X height.

This is a major expansion of dimensional pricing for USPS; however, FedEx and UPS still apply dimensional pricing to far more packages, since they do not limit its application to packages of more than one cubic foot, and the divisor they use is 139. So, for larger, less dense packages, USPS generally still provides better rates than standard retail rates offered by UPS and FedEx.

In order to understand dimensional pricing and its impact, it helps to look at an example.

Consider a backpack that weighs three pounds, which is shipped in a box measuring 22 x 14 x 6 inches, for a volume of 1848 cubic inches.

After June 24, 2019, pricing across the three carriers would look like this:

As you can see, while dimensional pricing applies for the USPS shipment, the dimensional weight (11.1 lbs.) is much lower than that computed for the UPS and FedEx shipments, amplifying the price advantage offered by USPS Priority Mail compared to UPS and FedEx two-day services.

Mitigating the Impact of Price Increases

Every year when we performs this analysis, we find numerous examples of instances where our customers chose a shipping option that was more expensive than necessary to get a given package to its destination on time. Given the changes we’re seeing in 2019, we recommend that USPS shippers look at two areas to potentially mitigate the changes discussed above:

1. Optimize your packaging: If you use USPS to ship packages that exceed one cubic foot in volume, it pays now more than ever to look at reducing packing materials and/or using alternative box shapes to reduce the volume as much as possible. If you ship packages under a pound and are not using FCPS commercial rates, it will definitely pay to shift as many shipments as possible to take advantage of them. Read more optimization tips here.

2. Look at USPS Priority Mail Flat Rate Boxes and Envelopes or Priority Mail Regional Rate Boxes: Flat Rate products are available in over a dozen sizes and styles and allow you to ship any content up to 70 pounds (as long as the content fits into the box) to any zone for a single price. Regional Rate boxes come in two sizes, which allow shipment of up to 15 pounds or 20 pounds for a zone-based rate. This is often lower than the weight-based rate for a custom-boxed package.

Christopher Vaughn is VP of Marketing at ShippingEasy, the leading provider of cloud-based shipping, inventory management, and customer marketing solutions for e-commerce sellers of all sizes. For more detailed information on the Rate Changes, and how they may impact business, review ShippingEasy’s free Rate Change Guide.

Editor's Note: References to UPS and FedEx pricing/surcharges assume retail rates and include applicable surcharges as of late December 2018.