The U.S. Postal Service has announced its annual rate increases. But this year, shipping rates aren’t simply going up — USPS rates are altering pricing in two key ways.
First, USPS has expanded dimensional weight pricing significantly. Once reserved for packages traveling more than 600 miles, dimensional pricing will now apply to all packages larger than one cubic foot. And parcels moving more than 600 miles will be priced with a lower dimensional divisor, effectively making them more expensive to ship.
Also, United States Postal Service is moving its First-Class Package Service to zone-based pricing. In the past, FCPS pricing was based only on weight. Now that destination zones are included in pricing, we expect that there will be a significant rate increase for their shipping services.
Dimensional weight (DIM) pricing and zone-based pricing are common across the shipping industry. These changes bring USPS more in line with its private-sector competitors, namely FedEx and UPS — though it still offers plenty of perks that make it an attractive option for shippers looking to keep shipping costs down on most postage.
USPS Rates are Increasing
The increase of USPS shipping rates varies by service. According to an analysis in Parcel Magazine, USPS Priority Mail and Retail Ground services are seeing the smallest rate increases, with an average of 3.9%. Priority Mail prices will rise by an average of 5.9%. And First-Class Package Service will jump by an estimated 12%, largely due to the implementation of zone-based pricing, which we’ll dig into shortly.
Priority Mail increases include:
- Small flat-rate box: From $7.20 to $7.90
- Medium flat-rate box: From $13.65 to $14.35
- Large flat-rate box: From $18.90 to $19.95
- Regular flat-rate envelope: From $6.70 to $7.35
- Padded flat-rate envelope: From $7.25 to $9.00
Across the board, that makes for an average rate increase of about 7%.
These increases are in line with the postage rates outlined in a notice that USPS filed with the Postal Regulatory Commission back in January. At the time, the Governors of the Postal Service said the proposed changes would “keep the Postal Service competitive while providing the agency with needed revenue.”
More Parcels will be Priced by Dimensional Weight
In the past, USPS only applied dimensional weight pricing to packages that were larger than one cubic foot and were traveling more than 600 miles, and they calculated those prices using a DIM of 194.
Now, those parcels larger than one cubic foot moving more than 600 miles will be priced using a reduced DIM of 166. Because of the way dimensional pricing is calculated, a smaller DIM almost always leads to a higher cost.
Dimensional pricing is the size of the parcel in cubic inches divided by the DIM. One cubic foot is 1,728 cubic inches. 1,728 divided by 194 results in a dimensional weight of 8.9 pounds. When the DIM shrinks to 166, the dimensional weight rises to 10.4 pounds. That means it will be priced as a 10-pound package rather than a 9-pound one.
Parcels larger than one cubic foot traveling less than 600 miles will be priced using a DIM of 194. All parcels smaller than one cubic foot will still be exempt from dimensional pricing.
Still, USPS uses a much more generous DIM than UPS and FedEx. Both private-sector competitors dropped their DIMs from 194 to 166 years ago, and in recent years, lowered them across the board to 139. Both companies apply dimensional pricing to all parcels regardless of distance traveled.
First-Class Package Service Pricing Becoming Zone-Based
The large increase in First-Class Package Service pricing is almost entirely due to USPS’s move to zone-based pricing. In the past, FCPS packages have been priced based only on weight.
For a package weighing just under a pound, FCPS Commercial prices now range from $4.94 for Zones 1 and 2 to $5.53 for Zones 8 and 9. Commercial pricing is available to orders with more than 500 pieces. Retail pricing, which applies to smaller orders, tops out at 13 ounces, and prices range from $5.71 for Zones 1 and 2 to $6.27 for Zones 8 and 9.
Still, FCPS remains one of the cheapest ways to move small packages quickly. For parcels weighing less than one pound, Parcel’s analysis found that FCPS was nearly 50% cheaper than USPS Priority Mail, 86% cheaper than FedEx 2Day, and 87% cheaper than UPS 2nd Day Air.
Where USPS Fits into the Parcel Shipping Landscape
No shipper likes paying increased rates. But these changes should not come as a surprise. They’ve been on the table for months as USPS has evaluated its pricing structure under direction from the Trump administration.
And despite these changes, USPS remains an attractive option for many shippers. The company was years ahead of FedEx and UPS in offering standard Saturday delivery. USPS pricing is still entirely free from accessorial surcharges, which can eat up a shocking amount of a shipper’s budget. And USPS’s mandate remains — to deliver to every U.S. address, no matter how remote.
Shippers can make some changes to adjust to USPS pricing, too. When using USPS, it’s always wise to review Priority Mail rates. It may be cheaper to switch certain shipments to flat-rate or regional-rate boxes.
Second, although the agency has expanded dimensional pricing, all parcels under one cubic foot are exempt. If it is possible for your company to modify or reduce the size of certain parcels, you may be able to stay under that threshold.
And finally, if you ship packages weighing less than a pound but do not yet use FCPS commercial rates, now may be the time to switch.
Want to talk through your options with an expert? Reveel’s team of consultants is ready for you. Reach out today to find out how we can help you save money on your shipping strategy.