As we approach the new year, speculation is mounting around potential USPS rate changes for packages under one pound. A recent LinkedIn post from an industry insider hinted that USPS’s Ground Advantage (GA) rates may soon experience a significant hike—possibly exceeding 10%—by early 2025. This change could reshape the landscape for e-commerce and other businesses that rely on affordable USPS options for light package deliveries.
What’s Behind the Potential Hikes?
Over the past four years, Ground Advantage and First-Class Package (FCP) rates for sub-1lb packages have steadily climbed, often aligning with or surpassing industry-wide general rate increases (GRIs). Here’s a closer look at the yearly increases:
– 2021: 5.7%
– 2022: 7.5%
– 2023: 7.9%
– 2024: 5.5%
These incremental hikes suggest a trend, but some analysts argue that USPS has historically undervalued its sub-1lb pricing compared to competitors, creating room for upward adjustments. As USPS aims to boost revenue per piece (RPP) and meet competitive pressures, a more substantial rate change could be on the horizon.
USPS’s Bigger Strategy
Industry experts believe Postmaster General Louis DeJoy and his leadership team are keen on transforming USPS to stay competitive. A significant rate increase could align with USPS’s broader pricing strategy, aiming to enhance revenue while remaining competitive against major carriers like UPS and FedEx. One pivotal factor is the possible elimination of Parcel Select Lightweight (PSLW) rates offered through workshare partners. Should USPS phase out this rate category, it would gain more direct control over the sub-1lb package market, potentially paving the way for notable price adjustments with minimal outside influence.
Will USPS Lose Volume with a 10%+ Rate Hike?
A double-digit rate increase understandably raises questions about customer retention. USPS would need to weigh the potential revenue gains against the possibility of losing volume to cost-sensitive competitors. Smaller carriers are already capturing market share with sub-$4 rates, offering budget-friendly options that could appeal to price-conscious shippers.
That said, USPS may view some volume loss as acceptable. As insiders suggest, DeJoy might not consider these smaller carriers a significant threat if USPS can maintain higher rates on core GA shipments. Additionally, USPS might address sub-1lb volume strategically through contract pricing, such as Negotiated Service Agreements (NSAs) or platform discounts, which would help retain key customers even amidst broader rate increases.
What’s Next?
With rate changes potentially announced within the next three to four weeks, the shipping industry awaits what could be one of USPS’s most significant moves in recent years. If Ground Advantage sub-1lb pricing undergoes a marked increase, e-commerce shippers and small businesses will need to quickly adapt, possibly exploring alternative carriers or adjusting pricing models to maintain their profit margins.
Final Thoughts: Will USPS Go Big?
Given USPS’s history of incremental yet strategic rate adjustments, a 10%+ increase for sub-1lb packages seems plausible. However, the full impact remains speculative until USPS confirms its new rates. What is clear is that USPS is determined to strengthen its market position, even if it means shaking up the sub-1lb package pricing many shippers rely on.
Stay tuned as we track this developing story to update you on any changes that could impact your shipping strategy.
