The United States Postal Service is ending its Destination Delivery Unit (DDU) discounts, eliminating a model that’s been a staple for affordable e-commerce delivery for years. Price increases from USPS aren’t new, but this one’s different. Rather than a simple rate change, it’s a structural change in how packages move through the network.
For brands and carriers that have relied on DDU discounts to control costs and speed deliveries, this is going to create meaningful operational and financial challenges. And the question everyone’s asking is: Who’s going to absorb the extra cost?
What’s Changing and Why It Matters
For years, DDU discounts allowed carriers and consolidators to inject parcels deep into the USPS network – typically at the local Destination Delivery Unit (DDU), aka: your local post office – for lower rates and faster delivery. The idea was simple: USPS avoided the work of upstream processing, and in return, passed along savings.
Now, USPS is moving toward taking back more control of the sortation process. Instead of accepting parcels at local DDUs, they’re now requiring injection at higher points in the network, like Sectional Center Facilities (SCFs), or even upstream from there. That means packages are traveling further within USPS’s operation, adding time, complexity, and cost to the process. It fundamentally changes how the last mile works for retailers, consolidators, and hybrid carriers.
The era of hyper low-cost USPS-powered deliveries, especially for parcels under one pound, is over.
Who’s Feeling the Impact?
Several groups are going to feel this change the most:
● Consolidators like UPS Mail Innovations, OSM, and DHL eCommerce, who built their businesses on leveraging USPS DDU discounts for low-cost final mile delivery.
● DTC brands, especially those shipping lightweight or low-margin products, where shipping costs are already tight
The bottom line? For a lot of businesses, the playbook they’ve used to keep shipping affordable just got a lot more complicated.
What Shippers and Carriers Are Losing
The DDU discount model wasn’t just about saving money. It also gave shippers more control over delivery times. With the ability to inject packages closer to the customer, carriers could bypass bottlenecks and keep delivery speeds consistent and competitive.
Now, with USPS taking that option off the table, the flexibility and savings that came with DDU are disappearing. Instead, carriers have to hand off parcels earlier to USPS, losing control and introducing new inconsistencies and delays. They’re also losing pricing power and operational efficiency.
For e-commerce brands, especially those in competitive markets, the margin squeeze is real. And it raises a tough question: Who’s going to eat the extra cost?
Honestly, the options aren’t great:
● Carriers can absorb the costs, but many are already operating on thin margins
● Retailers can take the hit, but rising shipping costs quickly eat into profitability
● Consumers can be asked to pay more or lose free shipping options, but higher shipping fees are a fast track to abandoned carts and lost sales
Nobody wants to be the first to flinch. But with DDU discounts gone, the cost has to land somewhere, and shippers need to decide quickly how to respond.
What Comes Next? How the Market Might Adapt
This shift is forcing retailers and logistics providers to rethink their delivery strategies. Here are a few paths forward:
1. Alternative Carriers
Alternative carriers have been gaining ground as shippers look for ways to diversify delivery and offset rising shipping costs. In many cases, they can offer faster, more affordable service, but nationwide coverage has always been the sticking point.
That’s starting to shift. According to new data from Colography in the 2025 Tusk Logistics Benchmark Report, the alternative carrier market has grown at a 34.5% compound annual growth rate (CAGR) from 2021 to 2024, outpacing the growth of the major national carriers. That momentum signals more reach, stronger networks, and expanding capabilities.
Advancements in technology and operations are also changing the game. It’s now much easier for businesses to bring alternative carriers into the mix without adding complexity. The right tools can unify tracking, customer communication, and operational oversight, even when multiple carriers are involved. In practice, it feels like one seamless network, both for shippers and their customers.
And the payoff can be significant. A large e-commerce 3PL recently reduced parcel shipping costs by an average of $2.25 per shipment, saving nearly 16% per package, by adding alternative carriers in their mix. At scale, those savings are projected to reach nearly $1 million annually, alongside added benefits like fewer exceptions, improved delivery visibility, and reduced support escalations.
For shippers, it's no longer a question of whether alternatives are viable, it's whether they can afford not to explore them.
2. Distributed Inventory
Some brands are investing in distributed inventory, moving products closer to customers to shorten the last mile and reduce costs. It works but requires serious planning and investment in warehousing and fulfillment infrastructure.
3. Revisiting Old Ideas
Concepts like micro-fulfillment centers, parcel lockers, or freight pooling might start to make more sense as delivery costs climb. Solutions that were once considered niche or experimental could suddenly become viable at scale.
4. Data-Driven Delivery
The smartest players will lean on data and analytics to dynamically route shipments, stitch together different carriers, optimize carrier selection, and keep costs in check.
There’s no one-size-fits-all answer, but the businesses that adapt quickly will have the advantage.
The bigger picture
It’s worth noting: USPS isn’t the only one shaking up the logistics world.
● FedEx and UPS are restructuring operations and raising prices to focus on improving their margins
● Amazon continues to expand its own delivery network
● New carrier options are constantly entering the market
The entire shipping landscape is evolving. The lines between carriers, consolidators, and technology providers are blurring. Expect more M&A, unexpected partnerships, and scrappy new players stepping up to fill the gaps.
Could USPS lose its grip on the last mile? It’s possible. Could new coalitions of regional carriers and tech platforms reshape the delivery game? It’s already happening in pockets of the market. In fact, according to Pitney Bowes’ latest Parcel Shipping Index, Amazon is expected to ship more US parcels than the USPS by 2028.
Final Takeaway
The end of USPS DDU discounts is a signal that the final mile is evolving. For shippers and carriers, now is the time to revisit your logistics strategy. Whether that means building new partnerships with alternative carriers, investing in distributed inventory, or leaning on smarter tech, one thing is clear: sticking with the old playbook isn’t going to cut it.
The final mile just got more expensive and more complicated. But for those willing to adapt, there's a major opportunity to stay competitive and exceed customers’ expectations.
Amine Khechfé is a seasoned Senior Executive and Thought Leader with 35+ years of expertise in e-commerce, SaaS, logistics, shipping software and management consulting. Amine was the co‑founder/President of Endicia until its acquisition by Stamps.com in 2015 and then as the Stamps.com (and later Auctane) Chief Strategy Officer focused on new innovations, new markets, new geographies, global postal carrier relations and global partnering opportunities and M&A until he retired in Oct 2023. Amine currently provides executive advisory and mentoring services and/or is a board director for companies such as BoxNearBy, OTO, ShipHero, SkyDropX, Tusk Logistics, and Webgility amongst others.
This article originally appeared in the September/October, 2025 issue.
