The U.S. Postal Service (USPS) announced Wednesday that it will discontinue discounts previously granted to shipping consolidators such as UPS and DHL, a move intended to bolster its financial health. This decision could lead to higher shipping costs for consumers as consolidators may pass the increased expenses onto their customers.
Shipping consolidators handle approximately 2 billion packages annually through the USPS, which constitutes about a quarter of the Postal Service’s total parcel volume. According to USPS Postmaster General Louis DeJoy, this change is designed to increase postal revenues and efficiency while encouraging shippers to utilize USPS services like Ground Advantage.
DeJoy emphasized that the initiative is focused on financial sustainability rather than dominating the parcel market. “I’m not trying to take over the package business. I’m just trying to save the mail business,” he stated.
The adjustment comes as the Postal Service faces financial challenges and shifting shipping trends, following an 80% decline in first-class mail volumes since 1997. Some existing consolidator agreements have already been renegotiated, and others will be updated as contracts expire over the next year, DeJoy explained.
“This reevaluation of business arrangements is essential for the Postal Service and the American people. We are open to negotiating deals with consolidators based on a more rational use of our network,” he added.
The changes will primarily impact shipping consolidators that deliver large volumes of packages to around 10,000 locations nationwide. The new policy will reduce these drop-off points to about 500 major hubs equipped to manage the volume more effectively.
This move is part of DeJoy’s broader strategy to address budget deficits and enhance operational efficiency under a 10-year plan aimed at achieving financial stability. It will not affect large shippers like Amazon, which have direct agreements with the USPS. However, it could result in higher shipping costs for products handled by consolidators such as DHL eCommerce and OSM Worldwide, as well as UPS through its SurePost and Mail Innovations services.
Satish Jindel, president of ShipMatrix, a shipping and logistics software company, warned that consolidators may struggle to adapt. “Their days are numbered,” he remarked, referring to the potential challenges consolidators will face in adjusting to the new pricing structure.
Recent changes reflect broader shifts in the industry. Pitney Bowes has announced bankruptcy protection for its e-commerce division, while FedEx is discontinuing its FedEx Smart Post service, transitioning instead to FedEx Economy Ground with its own resources and contractors.