UPS Mail Innovations’ USPS Deal Ends: What It Means for Lightweight Shipping

In late 2024, UPS Mail Innovations (UPS MI) lost its discounted pricing agreement with the United States Postal Service (USPS). That change triggered significant rate increases—especially for parcels under one pound. With USPS now charging UPS MI full published rates, the pricing structure that once made UPS MI a low-cost residential shipping option is no longer sustainable.

In Episode 21 of Parcel Perspectives, iDrive Logistics President Glenn Gooding, who previously led revenue strategy at UPS MI, outlines the impact of this change and what brands should do next.

The Shift: USPS Ends Its Discounted Agreement with UPS Mail Innovations

UPS MI was built around a workshare agreement with USPS that allowed it to deliver lightweight parcels at a reduced cost. When that agreement expired, UPS MI was left paying full USPS workshare rates—often higher than the rates it had charged shippers. As a result, the service began operating at a loss for under-one-pound shipments.

In response, UPS MI raised rates by 20% to 40%. But even with these adjustments, Glenn points out that the pricing is now out of step with what the market expects. For many brands, the once cost-effective option no longer delivers meaningful value.

Structural Limitations at UPS Mail Innovations

Beyond rate hikes, UPS MI faces constraints that limit its ability to pivot:

• Strategic overlap with Ground Saver: If UPS MI were to shift toward heavier packages to regain margin, it would directly compete with UPS Ground Saver, creating internal friction between overlapping services.
• Labor agreements: Existing union contracts restrict flexibility, preventing the company from adapting through faster or alternative delivery models like gig networks.

Glenn describes the current trajectory as “the beginning of the end” for the product and suggests UPS MI may exit the market entirely by 2025.

What Shippers Should Consider Now

If your brand regularly ships lightweight residential parcels, it’s important to assess your current mix of carriers. Glenn outlines four primary alternatives, each with its own trade-offs.

1. USPS Ground Advantage

This is the most direct fallback for shippers moving away from UPS MI. It typically offers the lowest cost for parcels under one pound but comes with limitations: slower delivery speeds, less reliable tracking, and more variability in performance. Introduced in July 2023, Ground Advantage replaced First-Class Package Service and Parcel Select Ground as part of USPS’s broader move to consolidate offerings and bring more lightweight volume back into its own network.

2. Gig Economy Carriers (e.g., Veho, Uni)

Gig carriers are well-suited for urban areas where dense delivery zones support fast turnaround. They offer competitive rates and strong performance for local routes. However, these networks typically don’t cover rural areas, which means they need to be paired with USPS or another national carrier to reach full coverage.

3. FedEx or UPS Ground Services

For shippers focused on reliability, major parcel networks like FedEx and UPS remain strong options. Their economy services can absorb under-one-pound packages, but the cost is significantly higher. Lightweight residential shipments carry low margins for these carriers due to high fixed delivery costs. As Glenn explains, “It’s low revenue on a high fixed expense for the delivery.”

4. Workshare-Dependent Carriers (e.g., DHL eCommerce)

Some carriers continue to rely on USPS for final mile delivery. These may offer favorable rates—but only if your volume meets their thresholds, particularly for heavier packages. Relying on this option can also complicate sourcing if your existing agreements with national carriers include performance or exclusivity clauses.

Wrapping up: What comes next?

If you depend on UPS MI for lightweight shipping, you need to have contingency plans in place. That doesn’t mean switching everything immediately. It means understanding the risk, modeling alternatives, and making sure your network can adjust as UPS MI continues to lose pricing power and strategic relevance.

Brands that have already started evaluating their options will be better positioned to control costs and avoid service disruption. Those who haven’t should move quickly.

Need support evaluating alternatives? Contact iDrive Logistics to build a plan that fits your fulfillment goals.