A Look at the January 21, 2018 USPS Rate Increase: How Will It Impact Your Budget?
|By Adam Lewenberg|
Postal rates are supposed to be tied to the Consumer Price Index (CPI), which today is running one to two percent. Although the overall increase may be in this range, we found that certain rates went down, while others went up dramatically. Also, this rule does not impact what the USPS considers “competitive” shipping services, where it has more flexibility to increase rates.
Remember, when the USPS talks about a one to two percent increase, this is an overall amount. Based on the type of mail you do, the increase could be higher or lower. You need to look at the class, weight, zone, density, and special services required to see the true impact. So when you hear about the rates increasing as of January 21, it's important that you don't automatically assume a one to two percent impact on your budget. Let's explore this in more detail.
First-Class Mail Single Piece - 1.1% to 21.4% Increase
The price of a stamp is going from $0.49 to $0.50, which is a two percent increase. The USPS did not increase the additional ounce rate, so the percentage change gets smaller as items get larger. This is compared to metered letters, which are increasing from $.46 to $.47. This is still the most significant savings ever offered in the US mailing industry because it means that by using a postage meter or PC postage, you will save $0.03 per piece, or six percent. Most discounts are tied to doing more work such as barcoding or sorting, whereas this is an automatic savings for just using a system to print postage that costs as little as $20 per month.
The rates for flats went up to $1.00, while lightweight parcels went up the highest amount, costing mailers a 13-21% increase. We believe this is because of the growth in shipping and lack of competition for lightweight packages.
First-Class Mail Commercial - Six Percent Decrease to 1.6% Increase
Letter and postcard rates stayed relatively flat in this category, with slight changes based on sort levels. We see the greatest changes in flats, where the five-digit rate increased by 6.3%, while the rest of the automation categories went down by six percent.
The biggest change in this category occurred last year when the USPS increased the weight limit for the letter rates from two to 3.5 ounces. A few years back, the USPS initiated a plan called “Second ounce rides free.” The goal was to increase the value of the mail piece, allowing customers to add additional content at the same price. They have now increased this limit to 3.5 ounces, which means that there is an incredible amount of material that can now be put into the envelope at no additional postage cost.
When you look at the chart above and compare the rates of a three-ounce metered letter at $0.89 to a commercial rate at $0.378, it is a 58% savings! This is a big win for presort services that are now more valuable because of the savings they can provide. Also for flats (9x12 or 10x13), consider folding those into 6x9 envelopes. The savings can be significant with these new rates and weight savings. A three-ounce flat at $1.42 now could cost as little as $0.378, assuming it could be automated through in-house software or presort services.
Marketing Mail (Formerly Called Standard Mail) – Seven Percent Decrease to 8.7% Increase
Marketing Mail letter rates stay relatively flat, with only the AADC rates going up by 1.1%. Flats, on the other hand, increase from 1.6-8.7% based on your sort levels. Non-profit rate letters are going up .6-3.2% while flats are going down by seven percent for the highest sort levels but increasing 6.1% for the lowest densities.
Priority Mail – Three Percent Decrease to 10% Increase (Depending on Weight and Zone)
Priority Mail is the most popular package service for the USPS, covering items weighing 13 ounces to 70 pounds and delivered in one to three days throughout the US. The rates are based on the weight and nine zones, which are determined by the distance you are shipping the item. They also have three different rate categories based on the type of customer:
Priority Mail Express– Three to 10% Increase (Depending on Weight and Zone)
Priority Mail Express rates have increased slightly across all categories. Here are the highlights:
First-Class Mail Package Service – 1.2 to 14.9% Increase
In the less-than-one-pound market, the USPS has a complete monopoly, and you can see that it is rethinking why it is providing some of the discounts in this segment. The private carrier rates all start at one pound while the USPS goes to the ounce. Think about the companies sending light parts that can be sent for around three dollars with the USPS vs. the private carriers that could be two or three times that amount. We are seeing the greatest increase as items get heavier, with 15.99 ounces prices going up 14.9%.
Additional Rate Change Items
To budget for this increase, you need to look at the type of items you are sending and the weight and zones that are most common to truly estimate the impact. The good news is that for most mailers, this will be a very small impact to your budget with opportunities for savings if you can take advantage of some of the new discounts offered.
Adam Lewenberg, CMDSS, MDC, President of Postal Advocate Inc., runs the largest Mail Audit and Recovery firm in the United States and Canada. They manage the biggest mail equipment fleet in the world and their mission is to help organizations with multi-locations reduce mail related expenses, recover lost postage funds, and simplify visibility and oversight. Since 2013, they have helped their clients save an average of 60% and over $34 million on equipment, avoidable fees, and lost postage. He can be reached at 617.372.6853 or firstname.lastname@example.org