Per documents filed on the Postal Regulatory Commision website on August 11, this offer will only be open to mailers with a volume of 500,000 pieces of First Class Mail in the same period in 2007 and 2008. This only effects non-parcel (letter, flat and card) mailings. Furthermore, it will only apply to volume in excess of a “threshold” target. This threshold is calculated by determining the amount of growth (or shrinkage) in a mailer’s volume between 2007 and 2008, and applying the same percentage to their 2008 volume. The discount will thus reward any pieces in excess of  projected, normal volume.

At the end of the program period, a rebate will be posted to the mailer’s permit trust account. In order to detect mail being held over from September or pulled forward from January, the 2007 and 2008 mail voluimes from those periods will also be examined and any drop in volume in those periods will be deducted from the mailer’s credited volume.

While this may result in modest revenue and volume gains for the USPS, the practice of targeting only the largest mailers may miss the mark. If the program were applied to all mailers, small businesses would have more incentive to use the mail. These small volume mail producers are most often overlooked by the big mailing firms. Besides the fact there are more small mailers than large ones, there is almost always more USPS revenue in 100 mailings of 1.000 pieces than in one mailing of 100,000 pieces.

We all know stamps went up 2 cents (or 4.76%). Overall, the increase is 3.5%. Almost all classes we checked got an increase this year (including the 01/18/09 partial increase). However, not all did.

Most of the the parcel rates already went up on January 18. Bound Printed Matter was not included. BPM Flats are the big winners in the classes we’ve looked at so far. For non destination entry, the per piece rate and almost all the per pound rates went down. Overall, shippers should expect a net decrease of about 2 percent.  For destination entry, the per piece rate went up, but the per pound rates went way down. I would expect a net decrease of 7% for these shippers. On the Parcel side, the non-destination rates went up about 7 percent, but this is offset by a decrease in the per pound rates for destination entry. Our analysis of typical customer files, which include substantial DBMC drop shipments, nets an increase of less than 1 percent.

Unlike last year, non-profits aren’t excempt this year. Average non-profit rates rose by about 4.25%. While this is modest, and in line with the general increase, it’s still not the good news they got last yeat (when they saw decreases).

If you’re tracking the unfolding story of the Intelligent Mail Barcode, there’s news for you here too. Effective 11/29/2009, Full Service IMB shippers will be able to deduct $0.003 per piece for First Class shipments, and $0.001 per piece for Standard Mail. Not a lot, but it adds up.

If you’re interested in a particular class of mail, please leave a comment and we’ll post the details.

Specifically, rates will increase for these classes of mail…

Domestic Services

Express Mail
Priority Mail
Parcel Select
Parcel Return

International Services

Global Express Guaranteed
Express Mail International
Priority Mail International
Airmail M Bags

Surprisingly, Bound Printed Matter rates will not increase, even though it’s package services cousin Parcel Select will. Standard Mail and First Class parcels will also not go up at this time.

The USPS news relase, with links to rate tables and files, can be found here.

Even with this rate increase, the USPS remains one of the best values in shipping. Especially for small parcels. They remain 7-14 percent below their competition in most classes. When comparing bulk rates, the differences can be much higher. Drop shipping and other advanced techniques can lower your costs even more.

What we do in these cases is switch to Standard Mail with drop shipping. The Standard Mail rates are lower, and by dropping the mail closer to its destination, we’re able to overcome the timing issues.

First, your piece has to qualify for Standard Mail. This means you can’t have any personal information inside, such as account balances. You also won’t get returns or forwarding services with Standard Mail without incurring additional charges.

Second, to gain a benefit, you must have a need for First Class style timing, and a piece that weighs more than one ounce. Alternately, a First Class flat or parcel would also gain by using this technique. If you’re not particularly interested in the timing benefits, you can just change to Standard Mail and realize a large savings anyway. By the use of pre-canceled stamps and other techniques, you can avoid the perception issues some associate with Standard Mail.

Once you’re past these hurdles, here’s how it works. We sort the mailing list for Standard Mail and identify geographic regions with large concentrations of mail. this can be an individual post office (DDU), a 3-digit zip Sectional Center Facility (SCF), or a regional Bulk Mail Center (BMC). Those destinations are then separated and forwarded to the appropriate center by truck or other carrier, or by Priority Mail sacks. This eliminates a lot of the sorting and travel time that would be incurred inside the USPS transportation system, and shortens the delivery window. The difference between the First Class and Standard Mail rates, plus discounts received by dropping into these centers results in charges that are about the same as the one ounce First Class rate. For a 2 or 3 ounce piece, this can be a substantial savings.

To illustrate the savings, one example customer had the habit of sending advertising letters in #10 envelopes weighing less than a pound by First Class. At current rates, their average postage per piece was 35 cents. When they shifted to a 6×9 envelope, with additional material weighing 2.5 ounces, the First Class rate would have been 60 cents! Their base postage for a Standard Mail letter weighing 3.3 ounces or less was 24 cents. This plus the shipping and processing charges, less the DBMC, DSCF and DDU discounts came to an average cost of 37 cents, a savings of 23 cents off the First Class rate. In all, they saved $6,325 off the postage they would have paid if they continued using First Class. Delivery times were equivalent and predictable as well.

With dropping volume in letter mail, the USPS has been emphasizing their packages services in recent years. They have been particularly aggressive with flat rate Priority Mail boxes, targeted at eBay sellers, and Express Mail services. 

Two rule changes allow them to become even more competitive in the package services (shipping) market. They will now use zones to calculate the postage on  shipments that formerly had fixed prices, and they are now able to offer discounts based on mailing volume and source of sale (online shipments for example). 

Here are some of the details of the new shipping rates…

Here are the major changes to Priority Mail:

• Customers can pay less by buying online.
• Flat-Rate boxes are now offered in a new, 50% larger size, designed for businesses.
• A new, reduced Flat-Rate box price for APO and FPO (military) addresses.

The USPS has always been very effective in high volume situations. New prices will
leverage and expand this advantage.

Parcel Select is shaping up to be a very interesting service. We’ll concentrate on it further  in future discussions. In the meantime, you should check it out if you ship a lot of small parcels.  Bound Printed Matter has always been a very efficient method of shipping books. Parcel Select will spread the cost savings to other types of parcels.

Normal pricing will continue to apply to customers who come to the Post Office, but now they’ll find lower prices if they pay online, use corporate accounts, or meet minimum daily volumes.

Previously, USPS prices were a higher than other shippers for short distances and a lot lower for some long distances. With the move to zone-based pricing, their prices  will be more attractive for short distances — where most of the volume is — and still have a price advantage for more distant points. 

For pieces up to 5 pounds, USPS prices are better than FedEx for every zone. Express Mail is the only product with Sunday and holiday delivery (for a $12.50 premium). Unlike other shippers, the USPS has no Saturday delivery surcharge.

There are so many more subjects, there will have to be more articles. To summarize, the USPS is redefining itself to not only handle its traditional role of letter carrier, but to expand services to include package services, returns processing, and international shipping. They’ve always performed these tasks. They’re just shifting the balance of  their pricing and marketing to reflect the changing business environment.

These examples are meant to give you a “first glance” of the amount of increase for major rate categories. It is not meant to be exhaustive. Your results may be different.

Details by rate. Unless otherwise noted, automation, bar coded rates are assumed.

• First Class Letter (.75 oz),  2.66%
• First Class Flat (4 oz), 1.01%
• First Class Parcel (4 oz), 2.28%
• Standard Mail Letter (.75 oz), 2.18%
• Standard Mail Letter (3.5 oz), 0.8%
• Standard Mail Letter (4 oz). 0.67%
• Standard Mail Flat (5 oz), 5.31%
• Standard Mail Mach Parcel (14 oz), 5.34%
• Non-Profit Letter (2 oz), 1.03% Decrease
• Non-Profit Flat (4 oz), 0.03%  (5 digit and 3 digit rate decrease)
• Standard Mail Enhanced Carrier Route (1.5 oz), 1.13%
• Non-Profit ECR (2 oz), No Increase
• Bound Printed Matter (3.3 pounds, 96.5% drop shipped DBMC), 3.44%

We will add other classes and examples as we continue to check the new rates. If you want us to look at a class of mail not listed, please ask. If you have a particular mailing file you’d like analyzed, please contact us.

From a consumer’s standpoint, the most important thing is, the First Class Single Piece rate (a regular stamp) will increase from 41 cents to 42 cents. The “Forever Stamp” is already looking like a good deal.  The USPS is continuing to expand on their “shape based” initiative with a flat/”Large” envelope going up 3 cents, and parcels/”Packages” getting a 5 cent increase.

Mailers will want to closely examine the rates posted on the new USPS prices page. Our initial impressions show this to be a relatively modest increase. However, there are some surprises. While the USPS has announced lower additional-ounce price for presorted First-Class Mail letters, this simply brings the basic presort rates into line with the automation rates. They also tout a lower per pound price for Standard Mail letters (ECR saturation and high-density) and Standard Mail flats. We also note other areas where postage has dropped.

There are many complicated things going on in this new rate case. For example, in Bound Printed Matter, the per-piece rate for non-destination parcels has dropped, while the per-pound rates went up. Both the per-piece and per-pound rates for destination entry parcels increased. Mailers would be well advised to model the effects of the new rates.

Updated prices for Express Mail, Priority Mail, and Parcel Select will be released in March.