The US Postal Service said Wednesday that it is ending discounts that shipping consolidators such as UPS and DHL use to get packages to the nation's doorsteps, in a move meant to help the Postal Service slow losses but that could see the higher costs passed on to consumers. Consolidators move about 2 billion packages through the Postal Service each year—accounting for roughly a quarter of its total parcel volume—and the change will boost postal revenues and efficiencies while encouraging shippers to simply use Postal Service services such as Ground Advantage, Postmaster General Louis DeJoy told the AP.
He insisted the move is aimed at financial sustainability even though it could boost Postal Service market share and make it more costly for consolidators, who could pass on the costs to consumers. "I'm not trying to take over the package business. I'm just trying to save the mail business," DeJoy said. The change is overdue, he said, as the Postal Service seeks to cut losses and deal with changing shipping habits following an 80% drop in first-class mail since 1997. Some consolidator agreements already have been renegotiated while others will be redrawn as contracts expire over the coming year, he said, per the AP.
The changes are part of Postal Service efforts to boost its Ground Advantage package shipments and to eliminate cheap access to its network for the most costly part of shipping—the final leg in which postal carriers make deliveries six days a week to 167 million addresses across the country, DeJoy said. It affects shipping consolidators that drop off large numbers of packages at about 10,000 locations across the country. Under the changes, the number of locations will be cut down to about 500 hubs that are equipped to handle the volume, he said. The move doesn't affect large shippers such as Amazon that negotiate deals directly with the Postal Service. But it could mean higher shipping costs for products shipped by consolidators who have saved money by using the Postal Service network for final deliveries. The big ones include DHL eCommerce and OSM Worldwide. UPS is another consolidator, through SurePost and Mail Innovations.
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