2020 was an exceptionally difficult year for the United States Postal Service, one that was cluttered by slowdowns, political conflict, and historically high demand. Long running financial issues ran headlong into a pandemic-related uptick in shipping from ecommerce outlets, which then was exacerbated by significant operational and process changes from top to bottom. The result was a lot of speculation about the health and viability of the agency in a post-pandemic world.
Unfortunately, the postal service isn’t out of the woods by any measure. The year to come promises more delays, and price hikes have been implemented as part of Postmaster General Louis DeJoy’s 10-year plan to balance some of the agency’s losses.
Delivery standards and prices are changing, and it’s important to understand what will be different and how that will impact ecommerce fulfillment.
Slower delivery standards
Nearly all major last-mile delivery providers experienced some delays in the past 18 months, mostly due to short staffing, pandemic-related health protocols, and overwhelming demand. For the postal service, these issues were made worse by a strategic drawdown designed to limit hiring and overtime hours for cost cutting purposes.
While other major providers have found their footing, the USPS is still facing trouble. At a time when consumer expectations have never been higher, fewer packages will be transported via airmail and more will be handled using long-haul trucks. This will cut costs and hopefully make ETAs more predictable, particularly during the holiday season. It also means that retailers will pay a higher premium for faster delivery.
Single-piece First-Class mail traveling within a local area will still arrive in two days, but expected delivery for out-of-zone shipping is changing from three to five days. A parcel sent via standard mail from Los Angeles to Boston could take as long as ten days to arrive.
Shipping a package out-of-zone using the USPS will take longer and cost more — a difficult burden for ecommerce retailers in an already competitive ecosystem.
The financial troubles facing the USPS are very serious. Here are just a few of the contributing factors:
- The agency operates on a universal service mandate that equally prices shipment to dense urban areas and far-flung rural localities despite the added cost (while other shippers do not have to adhere to this rule).
- The popularity of first class postage has decreased in favor of email.
- The price of postage stamps is determined by congress, not market rates for shipping. However, the USPS doesn’t receive tax funding — it relies on the sale of postage, products, and services to survive.
- A Bush-era congressional mandate changed pension policy so retiree healthcare costs need to be paid for 75 years into the future, which created a financial crisis for the USPS.
As a result of these and other challenges, the USPS has logged significant losses each year for more than a decade, including a $9 billion loss in 2019. There are simply not enough 58-cent stamps being sold to paper over that massive budget hole.
The USPS will likely continue to raise postage rates twice annually to dig out of its fiscal quagmire. It will also introduce a holiday surcharge on packages to add “surge pricing” to its period of highest demand. It makes fiscal sense for the survival of the service, but it does add a burden to its most frequent and valuable ecommerce customers.
Holiday season stressors
Despite ongoing difficulties, the USPS has improved sorting times and hired more staff this year in anticipation of an ecommerce-heavy holiday season. However, already some concerns are bubbling under the surface as postal workers brace for the busiest time of the year.
USPS logistics channels are already experiencing high volumes as many people continue to rely on online shopping. At the same time, worker shortages are running headlong into global supply chain hiccups, the most notable in the US is a current shortage of shipping containers to move goods internationally.
There’s also more pressure than ever to provide fast turnaround times on shipping, thanks to Amazon and other retail giants shifting customer expectations. Two-day delivery has become something of the ecommerce standard, with options for next-day and even same-day shipping with only a moderate surcharge. Sadly, slowdowns at the USPS threaten to turn consumers against ecommerce retailers that can’t promise fast, consistent turnaround on delivery.
How a 3PL provider can help
If you ship your goods to customers, now is the time to start planning ahead for unexpected headaches when the holiday season comes around. Whether that involves anticipating higher costs related to shipping using traditional channels or finding a new third-party alternative will depend on your core customer base, their location, and their expectations.
Fortunately, retailers have a number of shipping options available to them. Balancing USPS shipping with other last-mile logistics providers can help to find the middle ground with regards to cost and turnaround time.
Additionally, working with a stateside 3PL partner to manage warehousing, fulfillment, and moving goods to your end customer can help to save time, cut overhead costs, and most importantly, minimize risk and hassle during the most important season for retailers.
With a challenging holiday season ahead, the postal service’s price increases and changing standards are putting extra pressure on ecommerce companies. To ensure your products get delivered to customers on time, you need the help of an experienced and reliable 3PL partner like GlobeCon to manage a difficult logistics landscape.
From portside warehousing and freight forwarding to handling cargo at the port, GlobeCon has the technology and tools needed to keep your customers happy.