USPS to end discounted rates for package consolidators starting January 1

Following a September announcement, in which it said it would take steps to implement what it called a new strategic approach, regarding its contracts with package consolidator companies, which they define as those who consolidate large volumes of packages for entry into various points of the its network, the United States Postal Service (USPS) said today said that plan will go into effect on January 1.

USPS officials said that this change is a result of its refreshed product offerings and also improved operational and financial strategies.

As of January 1, USPS said it will no longer offer discounted rates through negotiated service agreements (NSA) for packages entered by consolidators at Post Office delivery units. What’s more, it noted that this move will focus on the organization’s strategy to build its USPS Ground Advantage product, which was rolled out in July 2023, and is comprised of two-to five-day service standards across the contiguous U.S, for packages up to 70 pounds (USPS is incorporating three services—USPS Retail Ground, Parcel Select Ground, and First-Class Package Service—into this service).

“We will make agreements with consolidators who are willing to negotiate deals based upon a more rational use of our network in a fashion that is mutually beneficial,” said Postmaster General Louis DeJoy in a statement.

USPS added that its decision to reevaluate its business relationships with package consolidators and to eliminate contractual price discounts for delivery unit entry is viewed as a crucial step toward long-term operational excellence and financial stability, which it called two important components of its 10-year Delivering for America plan.

When it initially laid out its plan in September, DeJoy explained that USPS decided that it is appropriate to make changes to how it utilizes NSAs in the provision of its Parcel Select product. 

“In that regard, to more effectively utilize our network and realize enhanced economies, we no longer intend to provide discounted rates through NSAs that incent parties to aggregate mail volume from multiple shippers and to bring such volume directly to our delivery units,” he said.

Parcel Select is the registered trademark name for the its economical ground delivery service for packages entered in bulk, including those entered at desti­nation facilities and is designed for and generally used by large- and medium-sized parcel shippers.

The top USPS executive added that it is challenging for the USPS to justify entering into NSAs that incentivize its transportation and processing network and leave USPS responsible for managing the final mile, which he said is often the most resource-intensive part of the delivery process.

Jerry Hempstead, president of Orlando-based Hempstead Consulting, recently noted that this move reflects how the USPS has decided it no longer wants packages at the delivery unit level.

“Their belief, I guess, is that they will now be able to enjoy those parcels further upstream in their network at a higher revenue,” he said. “My observation is that the rate levels offered by the other parcel carriers (UPS, FedEx, OnTrac etc.) for shippers of volume will end up being less expensive than the USPS and the volumes will divert to those carriers’ networks. History will prove out whether this was a prudent move on the part of the USPS.”