• Louis DeJoy’s “Delivering for America” plan will slow down some package service. 
• Small e-commerce businesses shipping small items will be affected the most. 
• President Biden’s nominees to the USPS Board of Governors are unlikely to oust DeJoy if confirmed. 
• See more stories on Insider’s business page.

Despite anger from progressives, President Biden’s three nominees to the United States Postal Service Board of Governors had no harsh words for the controversial Postmaster General Louis DeJoy Thursday as they testified before Congress.

This indicates that if they’re confirmed, DeJoy is likely keep his seat at the head of the post office — and get his chance to try and save it from financial ruin. DeJoy rolled out his grand plan to revive the flailing USPS last month. Along with Board of Governors Chairman Ron Bloom, DeJoy said the plan would put the agency on sounder financial ground — it projects $160 billion in losses over the next ten years without action — and attract e-commerce shippers, while building a more reliable service.

Improved financial footing is good for the e-commerce businesses that depend on USPS. But according to three experts in e-commerce package logistics, the 58-page “Delivering for America” plan could actually drive e-commerce packages away from the service by making it harder to compete with Amazon. 

DeJoy has always held that the agency wasn’t meeting standards even before the pandemic, which stressed the USPS to the point that packages piled up in the system and deliveries took days longer than usual. USPS estimates total US package volume will increase between 6% and 11% every year through 2025.

The new plan is to handle that growth both by improving operations and by taking more time to ship for some packages. 

USPS will spend $20 billion of the more than $40 billion in planned capital investments over 10 years on opening and upgrading processing facilities and an additional $2 billion on technology upgrades. The remaining $19 billion will go toward a new vehicle fleet and retail upgrades. 

These investments will help USPS adapt to large swings in the number of packages coming into the system, according to the plan. It will also shift some distribution centers currently processing mail and packages to handle only packages and add more automated equipment.

“Proposed changes to dedicate facilities to package processing makes sense, but there is no indication of expected velocity improvements,” Nate Skiver, founder of LPF Spend Management and former logistics manager at Gap and Abercrombie and Fitch, said. 

The Amazon effect is still in effect 

DeJoy’s other major strategy to increase reliability is to shift away from airfreight and move more mail and packages exclusively on trucks.

“It’s about service,” DeJoy said. “We move cubic volume off of aircraft to allow greater stability in our priority mail service. And we bring reliability and predictability back by moving a lot of volume back onto the ground.”

The problem is that this move, while it will certainly cut costs and could increase reliability, will make it harder for many e-commerce sellers to compete on speed.

The plan reads: “We will also propose to adjust the service standards for First-Class Packages to enable a greater percentage of that volume to be moved by surface transportation.” (It notes that the Postal Regulatory Commission will be asked to issue an advisory opinion before making this change.)

First Class package service applies to packages weighing under one pound, like a single item of clothing, prescription bottle, or book. 

“For the millions of eBay sellers or other [small and medium business] who rely on the postal service for a traditionally two- to four-day delivery — now three to five days is going to be the norm,” said Matthew Hertz, cofounder of Second Marathon e-commerce operations consultancy and former operations specialist at Birch Box and Rent the Runway.   

That difference could send shoppers to Amazon instead, said Hertz — the one thing e-commerce sellers of all sizes are desperate to avoid. 

The service standards for existing one- and two-day Priority services will stay the same and still use airfreight, according to a USPS spokesperson. “Last year, shipping customers selected one- or two-day service for 72% of their parcel shipments. We estimate that this could be as high as 90% by 2025,” the spokesperson said via email. 

USPS will create new products to offer faster service, according to the plan, but experts say slowing down the delivery standard for some existing services and creating new, likely more expensive services could hurt shippers already struggling to keep up with the free, fast shipping introduced by Amazon, and becoming more commonplace by the day. 

“DeJoy is suggesting that the current products are too cheap and too fast,” Hertz said.

In other words, when the postal service does meet a two-day window, it’s a bargain. But pricing closer to UPS and FedEx for similar speed could drive customers away. 

“I expect e-commerce will gravitate away from the USPS over time,” Glenn Gooding, president of iDrive Logistics said. 

Leave a vacuum and others rush in  

Though details were scarce, package shipping prices with USPS are likely going up across the board, according to the experts. Price hikes are a central part of the agency’s effort to increase revenue. 

“I would be surprised if there isn’t a package rate increase request made to the [Postal Regulatory Commission] before May,” Skiver said. 

When a leading service provider lowers service standards or raises prices, competitors are almost sure to get a boost. 

“Regional and final mile carriers will have an opportunity to fill the void created by the USPS, UPS, and FedEx,” Gooding said. UPS and FedEx have made it clear that amid the glut of packages triggered by the pandemic, they will be picking and choosing customers based on their own margins, which has already shifted business toward regional carriers.

If this is the case, the experts say any last-mile alternatives that can compete with UPS and FedEx on price are likely to get a boost if shippers diversify away from USPS. Those could be gig-economy companies like Doordash, Instacart, and Roadie or regional carriers like  LaserShip and Ontrac. 

And using those alternatives will require even small online sellers to store more inventory in more places, boosting micro-fulfillment and on-demand warehousing companies.