As of January 22, 2017, the United States Postal Service (USPS) has implemented rate changes for mailing and shipping, which includes the first increase in the price of Forever stamps since January 2014. Although some of the rates have stayed the same or even decreased, overall prices have increased this year, with Priority Mail rates increasing by an average of 3.9 percent, First Class Package Service by 4.1 percent, and Parcel Select Ground by 2.7 percent, according to Stamps.com. If you rely on these services to send coupons or get goods to customers, you should consider how the increased mailing and shipping costs will impact your prices and your bottom line.
Free shipping comes at a greater cost
In order to not lose out on what could quickly add up to large sums, you will have to account for the increased costs of mailing and shipping, which range from a couple of cents to more than a dollar difference for different types of mail. If you currently charge customers for shipping costs, you will simply adjust your rates to match the increases implemented by USPS. If you currently provide shipping free of charge, on the other hand, those costs must either be incurred as a loss, or be subsumed in the prices of the goods. When considering if it’s worth the hassle of incorporating the increased cost of shipping in the price of goods, it often makes sense to look at the percentage increase rather than the dollar amount. While it will vary from business to business, based on the products and volumes being sold and shipped, it generally makes little sense to change the price of the item when the added shipping costs are less than 4-5% higher than the old rates. When the increase starts climbing toward and beyond the 10% mark, however, it would be wise to adjust prices.
To ship a package that’s between 15 and 16 ounces, for example, the price has climbed $0.65, or nearly 18%, from $3.65 to $4.30. With an 17.8% increase on shipping, if you do not charge for shipping, you would definitely want to build the cost differential into pricing. Let’s say you normally ship out 200 packages per month at the 15- to 16-ounce weight. The difference between the old ($730) and new ($860) pricing would amount to $130 dollars in lost profits for the month, and more than $1500 lost over the course of a year if the shipping costs are not recouped in price! For smaller increases, like the flat rate envelope that’s now $5.95 as opposed to $5.75 last year, the $0.20 price difference represents about a 3.5% increase. If you ship out 200 units per month of this mail class, you will see shipping prices increase by $40 a month, and $480 per year. Once again, each business should make these choices individually, but regardless of the size of your business, a nearly 18% loss in profits is far more significant that 3.5%. For some companies, even the 3.5% increase may be worth building into the price structure, while for others, the loss would not be great enough to outweigh the advantage of slightly more competitive product pricing.
Data quality is your secret advantage to save—even when shipping costs more
Despite the increase in shipping costs, there is a reserve that you can tap into to save money even when shipping costs more, and that is an address validation service. Address validation is the process by which the addresses in a company’s database are broken into their component parts, compared against the USPS database to ensure they exist, then the best match is chosen and the address is updated if need-be. If you are experiencing high volumes of returned mail, address validation can help improve address hygiene and prevent you from spending even more money on mailings and packages that are not being sent to a valid address. To make sure that your mail and packages are reaching the intended recipients at the correct address, consider an address cleaning solution. Experian Data Quality offers a real-time address verification solution, and three options for bulk address cleanses: self-service address cleaning, address validation API, and one-time or regular address cleansing by our team of professionals. Our bulk solutions instantly correct missing or inaccurate address data elements, validating both domestic and international addresses, and cleaning your lists without interrupting existing collection processes.
Our address validation services can also help you qualify for the best postal rates. Improperly addressed mail costs the USPS time and money on sorting and delivery, so USPS developed the Coding Accuracy Support SystemTM(CASS) to evaluate the accuracy of validation and matching software. Businesses that use certified CASS address validation software often qualify for lower postage costs, which can amount to substantial savings over time. Our CASS-certified address verification can help your business qualify for postage discounts on bulk mailings and reduce the mail sort time for verification and lower mail transit time.
Are you ready to start 2017 confident that your addresses are clean and accurate? Our quick and easy-to-use solutions can help you get there.
Start your trial
