BY JEFFREY D. KNOWLES AND DAVID M. LEVY USPS Rate Increase to Take Heavy Toll on Shippers of Lightweight Parcels Electronic retailers that send merchandise to customers via the United States Postal Service (USPS) may soon face significant increases in order fulfillment costs thanks to a recent decision by the Postal Regulatory Commission (PRC). On March 2, the PRC issued a decision reclassifying commercial (bulk) Standard Mail Fulfillment Parcels – i.e., business-to-consumer parcels containing merchandise and weighing less than a pound – from a market-dominant service to a competitive service. The Commission also ordered the Postal Service to file rate increases large enough to make the money-losing category profitable. It has long been the position of the Postal Service and the Postal Regulatory Commission that the rates applicable to Standard Mail Parcels do not cover their variable costs. It is clear from the March decision that the Commission expects the price adjustments that will be filed by the Postal Service in response to the Commission’s Order will result in a substantial increase in the rates for these lightweight packages. This may mean an average increase in postage costs of roughly 40 percent for these packages. Historically, the Postal Service has been the carrier of choice for electronic retailers shipping CDs, DVDs, costume jewelry, apparel and other lightweight consumer merchandise because its rates have been substantially lower than those of its competitors. That is about to change; CHANNEL CROSSING: LEGAL 50 electronicRETAILER | April 2011 © Nruboc | Dreamstime.com