The past year was an exciting one for the mailing industry. Although I do not have a crystal ball, it is always exciting to share some thoughts about what could happen in our industry throughout 2019.
We all know that new USPS postage rates went into effect on January 27. These new rates are interesting and represent an opportunity to the industry. It is all too easy to groan about the record price increase of a First-Class stamp and lose focus on the opportunities we should all see; the biggest opportunity being that the price difference between ounce breaks is changing from $0.21 to $0.15. This means that every First-Class full rate or full metered rate mail piece will be less expensive after January 27! This is also true for presorted flats. The prices at every ounce break starting at two ounces are lower than those in place before the price change.
This is significant for our industry and an incentive to rethink protocols and adjust processes and practices. Traditionally, flats have not been considered economical or practical by the industry. These changes and realities alter that significantly. This new pricing should be viewed as an invitation to save money by adding content to these mail pieces and not creating multiple packages, as has traditionally been done. Actual reduction of rates is rare, and we need to seize the benefits of this change for our organizations. The industry has done similar things for some time for letter-size pieces (remember the “second ounce free” mantra?) and, now, flats have started to reward this same behavior. While it is not free, additional ounces are cheaper than last year, and those savings should be measured and reported to our organizations. This will be effective for flats up to 13 ounces and after that, there are some changes we all should be aware of.
New Year, New Changes
The USPS is making a big change to First-Class Package Services by adding zone-based pricing. Currently, the rate is determined solely by the package weight. As of January 27, the zone becomes a factor in these rate calculations. Priority Mail offers many benefits over competitors’ services, which include: flat-rate price options; ample selection of free packaging; no fees for Saturday delivery, fuel surcharge, or residential surcharges; end-to-end tracking and more delivery times between one and three days than any one carrier. In 2019, Priority Mail Commercial Base and Commercial Plus pricing will be identical. The big change within Priority Mail rates that shippers need to take notice of is the implementation of DIM-weight pricing for Priority Mail services, although this change will not be effective until June 23 of this year.
Simply stated, DIM weight is determined by volume and the space it occupies during transport. The USPS will begin applying this pricing to large parcels with low weights. The calculation is simple: Multiply the length, width, and height. If the result exceeds 1,728 cubic inches, divide the total by 166 and round up to the nearest full pound. The postage cost will default to the greater of the actual weight in pounds or the DIM weight.
DIM rating is not new, but two things are being changed: the divisor used in its calculation and the applicable zones where DIM applies. The new calculations will use 166 as the divisor (it was 194 prior to this rate change, but even at 166, it is still higher than the 139 used by FedEx and UPS). This change increases the DIM weight divisor, which increases the mailing costs for packages affected. Currently, only Zones 5-9 (further distance zones) are subject to DIM weight rules. The changes highlighted here will apply to all zones after June 23.
For the first time since 2016, we have a USPS Board of Governors. The board consists of two actual Governors, the Postmaster General, and CEO, as well as the Deputy Postmaster General. This group has approved six mailing promotions for 2019 (check out page 11 for a more in-depth look at these promotions)! As you will recall, there were no promotions offered in 2108 because there were no sitting Governors to approve them, which was a great loss for mailers. It appears that more nominations for Governor positions are forthcoming, and I am hopeful that our elected officials will do their jobs and make sure this situation never happens again.
All the promotions represent money-saving opportunities for mailers and organizations. This means that real dollars are available for those who take the time to understand, enroll, and participate — dollars that were not available to any of us in 2018. I encourage everyone to participate in these promotions as fully as possible. If you are mailing in 2019, why not participate in at least one of these promotions and save on postage? I cannot think of a reason why people would not participate, and I strongly encourage everyone to speak with their USPS account managers about taking advantage of these programs.
These changes are not random. In case anyone was in doubt, parcels will determine the success of the postal industry moving forward. Amazon, eBay, and Alibaba are growing at unimaginable and accelerating rates. The USPS must rise to the occasion or miss a golden opportunity. These new pricing strategies are meant to capitalize on this opportunity, so it appears the Postal Service is moving in the correct direction. I believe that First-Class and Marketing (Formerly Standard) Mail are still relevant and effective, but their volumes are not growing. The USPS must continue to offer services that move and deliver parcels as expected; this would include Saturdays and Sundays, if necessary. The rate changes they are implementing in 2019 incentivize our industry to convert parcels to flats when possible and minimize the size of the parcels that are shipped. Everyone knows shipping is not free (despite what customers may wish!), and the USPS is finally going to raise the rates on the products that are costing them the most to process. This strategy will also increase costs their competition pays for the USPS to carry their packages and perform last-mile delivery. I think this is long overdue and rather brilliant!
Making these adjustments will bear fruit. Amazon and others are exploring options related to building their own delivery services; in some markets, this has already happened. The USPS has the delivery network these private organizations desire. They also have a universal service obligation that no private entity wants, which is the main reason that privatization is no longer widely discussed. Our industry’s current delivery and cost paradigms must change to allow it to thrive and reach its fullest potential. Groups like the Mailers’ Technical Advisory Committee (MTAC), Idealliance, and others will lead our industry’s efforts to keep things working well as the USPS continues to serve us while working to improve service at prices that provide the financial relief that is so badly needed.
Mark Rheaume is a Services Engineer, Enterprise Services Sales Engineering, at Ricoh USA, Inc. He has over 35 years of industry experience developing, designing, and implementing solutions. Mark is and has been an active member in several postal industry associations as a board member, speaker, and writer. These associations include: MTAC, Idealliance, NPOA, PCC, MSMA, Mailcom, NPF, and Printing Industries of Minnesota. He can be contacted at Mark.Rheaume@ricoh-usa.com.
This article originally appeared in the January/February, 2019 issue of Mailing Systems Technology.