First-Class Package Service

The United States Postal Service® (USPS®) introduced a new competitive product called First-Class Package Service in a Federal Register notice on August 18, 2011. This new product will replace and remove First-Class Mail® commercial base and commercial plus parcels from the market-dominant product offering. First-Class Mail retail single-piece parcels remain a market dominant product offering. What this means for mailers is that the First-Class Mail commercial base and commercial plus parcel services are still available and at the same current prices, but the services will now have a different name, will have slightly different labeling and marking methods, and will now be subject to the competitive product price increase schedules.

Competitive vs. Market-Dominant

The USPS separates their products into two categories, called Competitive and Market-Dominant. The Competitive products include Express Mail and Priority Mail products, which are directly competitive with market products from other suppliers such as FedEx and UPS. The Market-Dominant products include other products, such as Standard Mail, First-Class Mail, Periodicals Mail, Package Services Mail and so forth. These products do not have any significant competition in the marketplace; the USPS is virtually the only supplier offering these types of delivery products.

This separation is important to the USPS so that they can react more quickly to changes in the competitive marketplace. One of the most significant differences is that the annual price increases for the competitive products usually occur in conjunction with price increases from their competitors, which is generally in January of each year. The USPS price increases for the market-dominant products, on the other hand, usually occur in April or May of each year.

Why the Change?

The USPS is making this move because their First-Class Mail commercial parcel products are in direct competition with their competitors parcel delivery products. First-Class Mail currently has USPS delivery standards of 1 to 3 days, so this makes it in the same category as many of the USPS competitors’ products. It is important to note that the USPS is only moving the commercial parcel portion of First-Class Mail into the competitive product category; First-Class Letters and Flats will remain in the market-dominant category, as will the single-piece retail parcel product.

What it means for mailers

For now, there is no change in the services offered by the USPS, nor is there any change in pricing. If you currently use First-Class commercial base or commercial plus parcels for mailing, you will be able to continue doing so. There are some labeling and marking changes to reflect the new product name, which take effect on October 3, 2011, but these changes are not mandatory until May 2012. Since this product is now in the competitive category, the price increases for these services will occur in January of 2012 rather than in May 2012, which is the time frame for price increases for market-dominant products. Mailers who use these services should prepare for these labeling and marking changes, and for a price increase sooner than May 2012. Mailers using these products will need to adjust their budgeting going forward to plan for increases in January of each year rather than in May.

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