The U.S. Postal Service took another step in Postmaster General Louis DeJoy’s 10-year plan, announcing today that it has requested regulatory approval to hike stamp prices an average of 6.9% beginning August 29.
DeJoy first unveiled his “Delivering for America” plan in March, saying he would overhaul the money-losing agency by expanding parcel delivery services to meet spiraling e-commerce demand and focusing on more lucrative business customers, with a goal of returning USPS to a financial break-even state by 2023.
After taking over the unprofitable agency in 2020, DeJoy has moved quickly to balance its books. That approach has occasionally drawn criticism when he pushed Congress to relieve USPS of mandated conditions like pre-funding retirement benefits, chose a contractor to provide primarily gasoline-burning instead of battery-powered mail trucks, and made cost-cutting measures for mail-sorting logistics just months before the Presidential election and winter peak holiday season.
However, DeJoy has defended his approach, calling it necessary “for achieving financial sustainability and service excellence.” He said today that the latest rate changes would help fund the $40 billion of investments in people, technology, and infrastructure he plans to modernize and improve the Postal Service’s operations and customer experience over the next 10 years.
Now, the proposed price changes would raise overall product and service prices by approximately 6.9%, including a rise in first-class mail prices of 6.8% to offset declining revenue due to shrinking volumes of mail in the system as people and business convert to e-mail and other digital forms of communication. Other rate hikes would raise the cost of metered letters from 51 cents to 53 cents, domestic postcards from 36 cents to 40 cents, flats (large envelopes, newsletters, and magazines) from $1.00 to $1.16, and outbound international letters from $1.20 to $1.30.
“For the past 14 years, the Postal Service has had limited pricing authority to respond to changing market realities,” DeJoy said in a release. “As part of our 10-year plan to achieve financial sustainability and service excellence, the Postal Service and the Board of Governors are committed to judiciously implementing a rational pricing approach that helps enable us to remain viable and competitive and offer reliable postal services that are among the most affordable in the world.”
The rate hikes come as shippers are already being squeezed by rising shipping costs and freight capacity constraints in a tight trucking market. Facing those conditions, some shippers may not have the patience to wait for USPS’ decade-long makeover, but will diversify their last-mile carriers in the meantime and take their mail business elsewhere, the industry analyst firm Spend Management Experts has warned.
Gartner, Inc.