Track and Quotes

Show Shipment Information - Track and Trace PackageTrack and Trace
Get a Shipping Rate QuoteRate Quote

USPS will not raise rates for market dominant products in 2010
Friday, 16 October 2009 00:00
Postmaster General stresses importance of businesses investing in mail to grow future business.

 WASHINGTON—At a time when it is facing significant cost pressures, the United States Postal Service will not raise rates in 2010 for market dominant products. This was made clear in a letter to USPS customers from Postmaster General John E. Potter.

USPS market dominant products include First-Class Mail, Standard Mail, periodicals, and single piece parcel post. These products, according to Potter, will not have an exigent price increase.

"This is the right decision at the right time for the right reason," said Potter. "Promoting the value of mail and encouraging its continued use is essential for jobs, the economy, and the future of both the Postal Service and the mailing industry.

Potter added that while increasing prices may have generated revenue for the USPS in the short term, the long term effect could drive additional mail out of the system. He also noted that the USPS wants mailers to continue to invest in mail to grow their business, communicate with valued customers, and maintain a strong presence in the marketplace.

Potter also explained that changes in pricing for its competitive products—Priority Mail, Express Mail, Parcel Select, and most international products—are under consideration, with a decision expected to be announced in November.

An industry analyst told LM that by law the USPS can only raise prices for Market Dominant—or non competitive—products, which are primarily transactions under 1 pound, by no greater than the Consumer Price Index (CPI) each May.

"Since the CPI for 2009 is going to be zero (or negative), there is only the option of going to the Postal Rate Commission and asking for exigent or emergency relief," said Jerry Hempstead, president of Orlando-based Hempstead Consulting.

This news comes at a time when the USPS is up against mounting fiscal issues, including a $2.4 billion net loss for the fiscal third quarter, as well as a significant drop off in volume due to a shift from traditional mail delivery to electronic communication alternatives, including e-mailing business documents and online purchase ordering, among other electronic mailing processes. This marked the 11th time in the last 12 fiscal quarters the USPS has had an operational net loss, with a fiscal year-to-date loss of $4.7 billion compared to $1.1 billion during the same timeframe last year.

In the fiscal third quarter, USPS mail volume totaled 41.6 billion pieces, marking a decrease of 7 billion pieces—or 14.3 percent year-over-year. This is its largest consecutive three quarter decline since 1971, with the USPS indicating it is likely to continue for the foreseeable future due to the ongoing electronic diversion of postal mail.

And in late August, the USPS offered thousands of employees a financial incentive—or early buyout before September 30. Hempstead said the USPS will know how many employees will accept the offer by November 1. Under the terms of the buyout, participating USPS employees would receive $10,000 over the first three months of Fiscal Year 2010 and a second payment of $5,000 in Fiscal Year 2011.

The USPS said the majority of employees eligible for the buyout work in mail processing facilities, whereas letter carriers are not eligible due to the fact that the number of addresses increases by about 1.5 million per year. This early retirement plan could save the USPS up to $500 million in labor-related costs next year, with up to 30,000 employees possibly accepting the buyout.

The USPS has taken additional steps to remedy its financial condition that are expected to save it more than $6 billion, including: cutting more than 100 million work hours—the equivalent of 57,000 positions— closing six district offices; a hiring freeze, including USPS officers and executives; potentially closing more than 3,200 of its 34,000 post offices and retail locations, and adjusting Post Office hours to "better reflect customer use," among others.

Even though the USPS says it is on track to hit its 2009 goal of $6 billion in total cost reductions, it is projecting a net loss of more than $7 billion by the end of the fiscal year.

Logistics Management, 10/16/2009