How a 10% USPS rate hike affects online retailers

A recent United States Postal Service rate hike that went into effect on Jan. 17 is affecting some online merchants, especially those who rely on specialty shipping options like flat-rate priority mail services, retailers and experts say.

On average, rates increased 9.5%, according to the U.S. Postal Service. This is the first time in three years the government carrier has raised prices on commercial Priority Mail.

Online retailer, which relies almost exclusively on the Postal Service’s priority mail flat-rate boxes, saw its bill go up 9.8% starting on Monday, says founder Mitch Goldstone.

Shipping costs are a major concern for the merchant because its business requires three shipments per order instead of one, like most e-retailers, and it prides itself on offering consumers free shipping on all purchases.

“Our crazy low prices and free shipping are huge for us,” says founder Mitch Goldstone. “I really didn’t want to change that.”, which generated about  $5 million in sales last year, converts photographic prints into digital format, so when a customer places an order to have photos scanned, the retailer first ships a flat-rate box to the consumer’s home. The consumer then fills that box with photographs and ships it to the retailer. Upon completion of the scanning process, the retailer sends those photos back to the consumer, along with a CD-ROM or thumb drive with the digital prints.

Each way, shipping costs the merchant $11.88 as of Monday, $3 more than before the rate hike. Still, Goldstone acknowledges the U.S. Postal Service rates on these types of shipments are far cheaper than anything other commercial carriers could offer.

“On average, our boxes weigh about 17 pounds,” Goldstone says. “That would cost about $40 without the flat-rate box.”

One shipping expert echoes that sentiment, acknowledging that small merchants are likely to be impacted the most by the hikes, as they don’t have the buying power that larger players do to negotiate discounted pricing contracts with the carrier. But still, the government-backed carrier will still be cheaper than other carriers for many shipping options.
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