Updated: Sep 26, 2021
And for eCommerce sellers with less than 100 orders a day... its not good change.
The most popular shipping strategy among online sellers will see BIG changes
Starting October 1st 2021, USPS First-Class Mail delivery times will go from 1-3 days to 2-5 days. E-commerce sellers with products are under 1 pound enjoy cheap and relatively quick shipping services through USPS First Class Parcel Mail. Sure, the USPS doesn't always deliver on their advertised 1-3 day promise, but at least you're able to, in good faith, advertise this service to your customers at checkout. This first class mail option is often the free (or low cost) shipping option on most etailer shopping cart check outs. Use the Washington Post's delivery estimate tool to see how USPS changes will effect your specific zip code or that of your fulfillment warehouse here. (No paywall, but the Post will ask you to give up an email address to get access to the tool)
"E-tailers" will not only face longer delivery times, but postage costs are expected to increase in January too. Businesses could face difficulties meeting their customers expectations. This may result in greater abandoned carts at checkout as businesses adapt to USPS’s lower delivery standards. Worse yet, eCommerce brands may receive lowered customer experience and poor reviews as consumers wait longer for their products. With this change, e-commerce brands are looking at Lower conversion rates, disgruntled customers, and tighter margins than before.
Read on to learn more about the USPS slowdown. If you're an eCommerce brand who's heard enough and wants to know what to do about it, check out how to leverage specialized hybrid (first mile/last mile) carrier plus post office logistic chains- normally only available to businesses with at least 100 daily orders- but not anymore.
Reasons driving Post Office decisions.
Save on Expenses or Nefarious Ethical Violations
Politically embattled Postmaster General Louis Dejoy is cutting costs in USPS sorting machinery, restricting overtime labor, and the existing work force. The postal network is experiencing a deficit of $160 billion over the next decade largely due to obligations on retiring employees pensions. USPS has been plagued with laughably late air delivery that's critical to make good on their 1-3 day shipping promises over longer distances. For example, in 2020, only 58% of the Post Office's contracted air transportation arrived on time. Late arriving planes required USPS employees to work overtime to try and meet their delivery metrics "as advertised". Dejoy's says switching to longer delivery windows, facilitated by increased trucking transportation, could save up to $10 billion over that 10 year period (sweet so only $150 billion left to go). This proposal is based on extending delivery dates in order to rely on USPS’s more "reliable" ground transportation network. It just so happens that part of that "reliable" ground network is XPO contracted trucks and logistics. XPO is a business that Postmaster General Louis Dejoy formerly owned, and then worked for, and a company in which his family still enjoys a major stake. hmmmmm
Increasing reliability or lowering standards?
In addition to reducing costs and legitimately lining he and his families' packets, Postmaster General Dejoy says his decisions on how the Post Office contracts out transportation is in order to increase "consistency" in transportation scheduling and provide more "accurate" [sic] [un-ambitious] shipping estimates to limit customer’s expectations. For eCommerce sellers that means Dejoy wants you to lower your customer's expectations too. Between January and March of 2021, only 86% of 2-day first class mail arrived on time. Three day promises were broken 42% of time. Only a slim majority (58%) of 3 day First Class Mail arrived on time and after missing that 3 day delivery by days, and even weeks, there were still lost and damaged packages, and needless return to sender shipping failures not reflected in this data.
But with USPS already ambivalent with not meeting the 1 to 3 day standards, who's to say that they are NOW going to make good on these longer delivery times? Does an advertised 5 day delivery window now mean 42% of deliveries will take over a week?
If your margins or connections don't allow you to offer free FedEx or UPS shipping especially for products under 1lb, you'll have to manage your customers expectations more. One factor under your control is ensuring same day order fulfillment to cut down on overall delivery timelines. Additionally, the follow on effects of receiving your raw materials or products from your manufactures will be delayed. Larger USPS shipments that will use the same logistics network will be likewise delayed. These adjustments higher up your supply chain may result in additional costs getting passed to you by your manufactures and squeezing your margins further.
How to overcome these changes
Starting October 1st, ecommerce brands reliant on First Class Mail through commercial postage providers such as Pirate Ship, Stamps.com, or Shippo will not see as much benefit and value in this service. Although still cost effective, will you be able to maintain your brand reputation and satisfy your customers? Or will your would-be-customers abandon their shopping carts when they see 5 day+ delivery, a $20 charge for 2-Day FedEx shipping, or be turned off by your previous disenfranchised customers citing "slow shipping" in negative reviews? You wont have to worry about that if you secure services offered by hybrid carrier contracted services from shippers who have partnerships with the Post Office for last-mile delivery.
Last Mile Delivery? Hybrid Solutions?
All things considered, USPS is the best established small parcel shipper for last mile delivery. They've got a sizable fleet of vehicles and large local footprint throughout the country. But before this successful "last mile" the USPS struggles with many of the preceding miles over long distances due to the fact that USPS doesn't own any of their own planes. Carriers such as UPS, FedEx, and DHL, have their own planes so they can ship across the country more efficiently than USPS. However, they don’t offer competitive rates for packages under 1 pound nor can they compete with USPS Priority "cubic" rates- (more on those in another article). Light packages have been USPS's bread and butter for online stores.
In a competitive and growing shipping market, all of the US's major carriers have made strategic and different partnerships to offer Direct to Consumer (DTC) sellers competitive lightweight pricing. UPS (SurePost), FedEx (Smart Post), and DHL (DHL eCommerce) each have joined forces with USPS to provide greatly reduced rates for shipments (including those under 1 pound) for high volume shippers.
Ready to sign up?- Not so fast little guy
While you can contact a sales representative...
... it's unlikely that you'll get a contract or even favorable terms, unless you have consistent 100+ orders a day and an established pickup location along a carrier route.
DHL eCommerce uses their DHL pickup fleet and high capacity DHL domestic sorting centers to deliver zip code specific parcels DEEPER into the USPS delivery network than any other hybrid-carrier. By work-sharing with USPS, DHL eCommerce gains large discounts in postage that they pass on to online e-tailers.
UPS Sure Post "a shipping service that utilizes UPS's ground networks to cover most of the distance a parcel needs to travel, but relies on the U.S. Postal Service for the final leg of the shipment." It's a cheaper option that, according to UPS, "provides just about the same level of service as standard ground shipping" There are even options for packages larger than 1lb.
FedEx Ground Economy (formerly FedEx SmartPost) - yeah what they said^ basically the same thing ;P
Leverage a Fulfillment 3PL (Third-Party Logistics Company)
The aggregated shipping volume of dozens of other small businesses allow 3PLs to more easily attain discounted postage for fast delivery of lightweight parcels through hybrid carrier servicers. These 3PLs also store your inventory, pick and pack your orders, and then ship your orders to your customers with fulfillment software directly integrated with your eCommerce platforms such as Shopify, Big Commerce, WooCommerce word press sites. A 3PL, adept at handling large volume, provides you better shipping rates than you would be able to contract on your own which will become especially crucial when regular USPS First Class Mail service delays go into effect and you need faster, cheaper small parcel fulfillment. Plus, you'll have the stress of inventory, staffing, rent overhead, and fulfillment taken off your plate allowing you to focus on scaling and working ON your business, not just working IN your business.
...many "Big Corporate" 3PLs such as Ship Bob, Red Stag, Fulfyld, Flowspace, have even higher minimum volume requirements and restrictive SKU-to-sales ratios you have to pass in order to just "get in". Inflexible practices, restrictive packaging, long term storage and bin fees along with plenty of "fine print" and admin fees make outsourcing fulfillment a daunting and hazardous endeavor. With many intermediary fulfillment centers (some plagued with the same big corporate rules) reaching capacity, given the Covid boom in eCommerce, a smaller online seller's options seem limited. However there are many that have no minimums, that are startup/crowdfunding friendly, and are eagerly taking on new clients.
Fabulous News for Small Business and startups...
If you're browsing 3PLs and have questions about fulfillment services, contact our personable, owner-led-team, of fulfillment and 3PL experts at www.FulfillmentCO.com. One of our engaged and small business minded owners will directly reach out to you with resources and honest evaluation of where and how Fulfillment CO can partner with you and your eCommerce business with DTC, B2B, FBA, Dropshipping, on-demand labeling, and so much more.
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