Amazon.com Inc. (NASDAQ:AMZN) will raise shipping rates this holiday season to offset the peak holiday surcharge scheduled to be imposed by the U.S. Postal Service (USPS).
In a brief, undated communique to the millions of sellers that use Amazon to sell, fulfill and deliver products, Amazon said that the “USPS rates” available to Amazon’s shipping customers will increase to “coincide” with the surcharges, which take effect Oct. 18 and run until Dec. 27.
USPS announced last month that it will levy its first-ever holiday surcharge, with the hit to be felt by commercial shippers tendering very large volumes. The surcharge will apply only to domestic traffic. Retail customers and international shipments will not be impacted. The Postal Regulatory Commission, a separate federal agency which approves all USPS pricing actions, signed off on the proposal earlier this month.
The Amazon communique did not address whether the price increase will take the form of a pass-through of the USPS surcharge rather than a markup as other large postal users have planned. An Amazon spokesperson did not respond to an emailed request for comment by press time.
USPS’ surcharges will increase a 1-pound rate for the agency’s popular Parcel Select drop-shipping service, where consolidators dump bulk parcels at the local post office for delivery by letter carriers to residences nationwide, by as much as 7.5%, from $3.19 to $3.43 per parcel. The rate for a returned parcel of the same weight would rise 7.9%. The rate of a parcel weighing less than 1 pound would jump by 13.3%.
Commercial rates on USPS’ Priority Mail two- to three-day delivery product would rise 5.9%, from a low of $7.02 to $7.42 per piece.
All told, the surcharges would average out to 6% to 8% increases on USPS’ largest mail users, according to estimates from investment bank UBS.
UPS Inc. (NYSE:UPS), one of the top three users of USPS’ parcel services, plans to mark up its rates to small to midsize (SMB) customers of its SurePost product it operates along with USPS. According to UBS estimates, UPS’ markup could be two to four times higher than the higher prices it pays USPS.
It is not clear if Memphis, Tennessee-based FedEx Corp., (NYSE:FDX), which had been expected to move all of its postal parcel business in-house by the end of 2020 though the pandemic-related volume surges throughout the year may have delayed the timetable, will follow the same strategy. The two rivals tend to move in lockstep in matters such as this.
Seattle-based Amazon, USPS’ largest parcel user, has moved much of its last-mile delivery business in-house as part of a broad strategy to self-handle as many parcels as its fast-growing infrastructure can accommodate. Two consultancies, MWPVL International and ShipMatrix, project that Amazon will self-handle 85% to 90% of its shipments within the next two to three years. Amazon is at about 67% today.