BY MARK B. SOLOMON, SENIOR EDITOR

PARCEL EXPRESS

THE U.S. POSTAL SERVICE (USPS) will face various tests on its path toward true parcel delivery legitimacy. One of its most important tests has already commenced.

On Aug. 15, the Postal Regulatory Commission, the body that rules on the agency’s pricing actions, approved a USPS proposal to radically reduce rates on two of its “Priority Mail” one- to three-day delivery products for high-volume customers. The program rolled out on Sept. 7.

The rate cuts affect two Priority Mail services: Commercial Base, which carries no volume requirements and is available to customers that give parcels to USPS using specific methods of tender, and Commercial Plus, which requires that users have shipped at least 50,000 Priority Mail pieces in the prior year. The latter service is geared toward high-volume users like e-tailers, big business-to-business (B2B) shippers, and parcel consolidators that aggregate packages from multiple shippers and induct them deep into the USPS distribution network to get sizable bulk discounts.

In a statement issued in July disclosing its plans, USPS said Commercial Plus rates would decline, on average, by

2. 9 percent. But the overall numbers are skewed because
there are virtually no rate changes on parcels weighing up
to three pounds.

However, starting with the four-pound weight break, considered the “sweet spot” of parcel weight, rates begin to fall dramatically. For example, the new Commercial Plus rate for a five-pound parcel moving between 301 and 600 miles represents an 18.8-percent drop from the prior level, according to data from consultancy Shipware LLC. The rate for shipping a 10-pound parcel between 601 and 1,000 miles has dropped by 36 percent, according to the firm. The price of shipping a 15-pound parcel between 151 and 300 miles has fallen by nearly 48 percent, the firm said. The comparisons apply to B2B and business-to-consumer (B2C) traffic.

For parcels weighing up to 20 pounds, the tariff rates
charged by UPS Inc., one of the post office’s two main
rivals, are now 11 to 56 percent higher than USPS’s new
Commercial Plus rate depending on the parcel’s specific
weight and distance shipped, according to Shipware. The
UPS list price for a three-pound parcel moving under
300 miles is now almost 41 percent higher than the USPS
Commercial Plus rates, the data show. The widest rate dif-
ferentials occur in the lightweight bands where shipments
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