Big changes are coming for USPS and First-Class Mail
As of May 1, USPS will be modifying First-Class Mail delivery times from 1-3 days to 2-5 days. For the majority of e-commerce sellers whose products are under 1 pound, First-Class Mail makes up the majority of your shipments. This is a huge blow to your company! You can see just how much of an impact these delivery estimate changes will have on your brand based on your zip code here.
Not only will the majority of shipments take longer to arrive, but postage costs are expected to increase as mailers could face difficulties in adapting to USPS’s new delivery standards. What does this mean for e-commerce brands? Lower conversion rates, more disgruntled customers, and tighter margins.
Not all hope is lost, however. Read on or click here to learn how you can overcome these changes!
Why is USPS making these changes?
Costs
Postmaster General Louis Dejoy is making these changes to cut costs for the network that is experiencing an expected deficit of $160 billion over the next decade. In 2020, only 58% of their air transport arrived on time, requiring USPS to spend more on transportation. This plan could save up to $10 billion in that time by relying more on USPS’s ground network.
Reliability
In addition to reducing costs, Dejoy wants to increase consistency in transportation scheduling and provide more accurate estimates to limit customer’s expectations. For First-Class Mail between January and March of 2021, only 86% of 2-day mail arrived on time and only 58% of 3-day mail arrived on time. In essence, delivery dates have been rendered meaningless.
Unexpected consequences
While you would think this may smooth out mail processes, sources in the industry believe this may have a major impact on mail disruptions and costs for customers. Since parcel shippers have very finely tuned processes in line with USPS’s network, it would take time for them to adjust to the new standards. These adjustments will result in additional costs that may get passed on to consumers.
How to overcome these changes
In the past, you could easily obtain USPS commercial rates through companies that provided USPS discounts, like PirateShip. Starting May 1, this will not be the advantage it once was. With all this being said, how can you, as a brand reliant on First Class Mail, maintain your brand image and advertise cost-effective delivery to your customers? The answer lies in utilizing services offered by carriers who have partnerships with USPS for last-mile delivery.
Who are these carriers?
USPS specializes in last mile delivery with a sizable fleet of vehicles, but struggles with long-distance shipments due to the fact that they do not own any planes. Carriers such as UPS, FedEx, and DHL, have their own planes so they can ship across the country more efficiently than USPS. However, they don’t offer competitive rates for packages under 1 pound with their normal consumer services. This has been USPS's selling point to online stores for years. To combat the lack of competitive lightweight pricing, UPS (Mail Innovations), FedEx (Ground Economy), and DHL (eCommerce) joined forces with USPS to provide greatly reduced rates for shipments (including those under 1 pound) for high volume shippers.
How do I sign up?
Option 1: Contact a Sales Representative
The first way you can access these services is by reaching out to a sales representative for each respective company.
FedEx Ground Economy (formerly FedEx SmartPost)
The Catch: You need to be shipping at least 100 orders/day to make this happen, so this isn’t an option for most sellers. Even if you’re hitting those volumes, you still may get better rates using a 3PL. On top of this, these services have limited availability. With the recent boom in eCommerce, most of these services are closed to new accounts until at least mid-2022 which leads us to option 2.
Option 2: Utilize a 3PL (Third-Party Logistics Company)
A 3PL (AKA fulfillment center) is a company that stores your inventory and integrates directly with your eCommerce platforms (i.e. Shopify) to pick, pack, and ship orders for you. Since 3PLs handle massive volume, they will likely be able to provide you with better rates than you would negotiate on your own. In addition, having the stress of fulfillment taken off your plate is important to allow you to focus on scaling your brand.
While many 3PLs are reaching capacity with the recent boom in eCommerce, there are many that still have availability.
If you're browsing 3PLs and have questions about fulfillment services, contact our team of experts at OTW Shipping and we can walk you through anything you may need.