Clarus Commerce CEO Tom Caporaso discusses how the possible USPS rate hike will affect retailers as well as some ways they can try to mitigate these costs.
(As originally published on Internet Retailer on October 12th, 2018.)
The changes come after months of pressure from President Donald Trump, who has been calling on USPS to dramatically increase the rates it charges Amazon for package delivery.
The United States Postal Service (USPS) yesterday revealed a list of proposed rate hikes for fiscal year 2019 that would raise prices on the kinds of shipping services used by Amazon.com Inc. and other e-retailers.
According to the proposal, rates for traditional parcel delivery—which applies to packages weighing more than a pound—would go up 9.3%, while the rates for lightweight packages would rise 12.3%. If approved by the Postal Regulatory Commission, the changes would take effect on January 27, 2019.
USPS also plans to raise the price of a first-class stamp by 10% to 55 cents. First-Class Package Service, a lightweight expedited service used primarily by businesses, including retailers, for fulfillment purposes, will move to zone-based pricing, which will make the shipping rate partially determined by the distance the package travels. This move, USPS says will better align First-Class Package Service with its cost.
“This can be really concerning for e-commerce companies because they are already feeling pressure from Amazon and margins are thin as it is,” says Tom Caporaso, CEO of Clarus Commerce, a firm that works with small to medium-sized retailers create loyalty programs.
Caporaso says we’re now in the “age of the customer,” which means shoppers, armed with easy access to price and availability information, can easily move on to other retailers. That, he says, will make it hard for e-retailers to pass along higher shipping costs to consumers. “If the prices on products went up to offset the higher shipping costs, customers would simply shop elsewhere, like Amazon.” he says.
The changes in postal prices come after months of pressure from President Donald Trump, who has been calling on USPS to dramatically increase the rates it charges Amazon for package delivery. Earlier this year, Trump pushed USPS officials to double package delivery rates paid by Amazon and other companies.
In April, Trump ordered the creation of a task force to review business practices at USPS, a move that could hurt Amazon, which has been one of the president’s favorite corporate targets in statements and on Twitter. In March, Trump tweeted: “I have stated my concerns with Amazon long before the Election. Unlike others, they pay little or no taxes to state & local governments, use our Postal System as their Delivery Boy (causing tremendous loss to the U.S.), and are putting many thousands of retailers out of business!”
While the U.S. Postal Service’s contract with Seattle-based Amazon is confidential, the agency has argued that the relationship is beneficial and supports mail customers and other services. The Postal Service is prohibited from charging shippers less than its delivery costs.
The president asserted in July that Amazon and The Washington Post, which is owned by Amazon CEO Jeff Bezos, were lobbying in favor of Amazon’s continued dominance in e-commerce. Amazon’s detractors also have recently criticized its dominance in public procurement contracts. Trump also has said he thinks Amazon, No. 1 in the Internet Retailer 2018 Top 500, has a “huge antitrust” problem, referring to federal laws designed to protect consumers from predatory business practices and ensure fair competition in the marketplace.
This year, Amazon has spent about $6.8 million on lobbying through Aug. 28,according to OpenSecrets.org, which tracks such expenditures. In 2017, Amazon spent $13 million, according to OpenSecrets.
In a memo issued in August, Trump directed USPS to eliminate international postal discounts that let Chinese merchants inexpensively ship goods directly to U.S. consumers’ homes. That move challenges the international postal rates negotiated through the Universal Postal Union, a United Nations agency that coordinates postal policies among nations. The president wants the deals re-examined.
USPS on Thursday also released a list of recommended mailing and shipping deadlines for delivery by Dec. 25, as well as guidance on its expected volume during the holiday season. The recommended deadlines start as early as Nov. 6 for Air/Army Post Office, Fleet Post Office and Diplomatic Post Office addresses and and as late as Dec. 22 for Priority Mail Express service.
Beginning the week of Dec. 10, USPS says it expects customer traffic to increase, and it expects to deliver nearly 200 million packages per week during the from Dec. 10 until Christmas. The week of Dec. 17-23 is predicted to be the busiest mailing, shipping and delivery week. During that week alone, the USPS expects to process and deliver nearly 3 billion pieces of First-Class mail, including greeting cards.
USPS also expects Dec. 17 to be its busiest day online with more than 8 million consumers predicted to visit USPS.com. USPS predicts nearly 105 million consumers will visit its website between Thanksgiving and New Year’s Day.