News / USPS privatisation would change the dynamics of rocky US final-mile landscape

© Pawel Talajkowski

The US parcel market is facing the prospect of considerable upheaval in the coming year, as thoughts in the incoming administration of privatising the postal service (USPS) could be adding another twist to the changing dynamics in ecommerce flows.

According to reports that emerged over the past weekend, US president-elect Donald Trump is considering this scenario. Faced with the fact that the postal agency deepened its deficit in the past fiscal year, he reportedly commented that the federal government should not have to step in and cover the losses.

The USPS tabled a net deficit of $9.5bn for the past fiscal year, which ended on 30 September, $3bn more than the previous year’s loss; since 2007, the agency has lost more than $100bn.

Apparently, people who will work at the Department of Government Efficiency (to be led by Elon Musk and Vivek Ramaswami) have had some preliminary conversations about the future of the USPS.

Privatisation would have outsize repercussions, especially for rural residents, who rely on USPS disproportionately for deliveries, and for small businesses that need it for deliveries, invoices and payments. The service has played a big role in the fina-mile delivery of ecommerce, given its unrivalled network spanning the nation.

Some of this latter aspect has already been in flux, as the USPS leadership has moved to end discount deals for parcel consolidators that have been feeding their traffic to the service for final delivery. This is part of management’s ‘Delivering for America’ 10-year roadmap to build its own end-to-end package delivery network, rather than be left with the low-density, high-cost final-mile sector.

According to postmaster general Louis DeJoy, consolidators can still negotiate deals with the USPS for delivering their parcels, but those would be based upon “a more rational use of our network in a fashion that is mutually beneficial”.

UPS’s reaction to this came yesterday with the announcement of an increase in rates and delivery area surcharges for its SurePost shipments, which the integrator typically hands to the USPS for the final mile or delivers itself. The increases, which come into effect on 13 January, vary by package weight and shipping distance between 6.7% and nearly 10%.

Meanwhile, FedEx unveiled new surcharges and fees last Friday that will also take effect on 13 January. These include an inbound processing fee on US imports as well as a duty and tax forwarding fee. The integrator will also impose a 40lb minimum billable weight on packages subject to a dimensional handling surcharge, plus a delivery surcharge on deliveries to several new postal codes.

It remains to be seen how much of these surcharges will stick. Both UPS and FedEx unleashed a slew of surcharges for peak season, which were largely cancelled out by discounts they had to offer to retain customers in a hotly contested market.

The general rate increases for 2025 of 5.9% the two large integrators are set to levy in the new year are also facing some headwinds. Amazon recently announced that its fulfilment fees would go up 3.5% on 15 January. The ecommerce giant has increasingly expanded its offerings to third-party shippers.

For Buy with Prime orders, the service fee remains unchanged and fulfilment fees for some large standard-size units will decrease, Amazon announced.

But Amazon is looking over its shoulder at Walmart, which is also increasingly courting third-party shippers to use its delivery network. The retail behemoth slashed its net delivery cost per order by 40% in the third quarter, EVP and CFO John David Rainey said in an earnings call last month.

Beyond these developments loom question marks over US lawmakers’ plans to remove de minimis exemption for a large list of ecommerce products from China. Observers have pointed out that Temu, Shein and AliExpress have been working to build up fulfilment centres in the US and Mexico to hold popular items for rapid surface delivery to US consumers.

The current tidal wave of airfreight imports carrying ecommerce from China may be replaced by surface shipments from North American points, changing the dynamics for parcel networks.