Postal Service Prices Last Mile Aggressively in 2011

The Postal Service has just released its 2011 rates for Express Mail, Priority Mail and Unregulated Parcels.   Going through the entire proposal will take some time.   However, a quick review of Parcel Select rates indicates that the Postal Service has not chosen to follow the rate increases of United Parcel Service and FedEx in its pricing of the last mile.   Instead, its pricing for 2011 suggests an aggressive effort to gain market share over the last mile while focusing on ensuring that delivering parcels under 1 pound are profitable.  The Postal Service's rate increases for Priority Mail also suggest an aggressive effort to gain market share on end to end shipments.

• The Postal Service has proposed no rate increase in parcel select shipments regardless of weight dropped at the destination SCF.
• The Postal Service has significantly raised rates on shipments not dropped at the destination SCF that weigh less than a pound.   These rates rose between 4 and 30% depending upon zone and machinability.  Rates for shipments to zones 3, 4 and 5 are all up double digits.
• Rate increases for heavier shipments are below increases announced by UPS and FedEx.   These rates are between zero and 3% with the largest increases found among heavier shipments traveling long distances.  The rate increases proposed are more than likely lower than the cost increases of United Parcel Service and FedEx and should expand their effort to selling the services that they provide jointly with the Postal Service.
• Priority Mail Commercial Plus rates are rising only 2% on shipments over 2 pounds.   Shipments under 1 pound are rising by larger single-digit percentage increases with 1 to 2 pound shipment rate increases depending upon distance.

Overall, consolidators that use Parcel Select service, as well as most of their customers, should be quite pleased with these rate increases.   These rate increases combined with FedEx and United Parcel Service's 10% increases in rural and remote area surcharges will likely expand the geographic area where parcel select is competitive and the low rate increases for shipments over 1 pound may encourage shippers to consider parcel select for more shipments than they have in the past.