Australia Post on Monday faced a social media backlash from online shoppers furious over its increased prices for prepaid parcels, which came into effect this week.

Across Twitter, Facebook and the Australia Post website, the national postal service was inundated with hundreds of complaints over its decision to overhaul the postal system, resulting in increased costs for online sellers of up to 40 per cent.

Australia Post said the increase in prices were mostly "less than 7 per cent" and would now include tracking as standard.

In the new scheme customers will now be able to choose a speed - same day, next day, or regular - and then choose add-ons such as extra cover or cash on delivery, a spokeswoman said.

However, online retailers will now have to pay for such services, some of which they used to receive for free as part of using registered post. That could mean price increases of up to 40 per cent, some retailers revealed, once add-ons were included.

The cost of Australia Posts's signature-on-delivery service, once restricted to eBay sellers via the Click and Send service but now universally available, almost tripled, from $1 to $2.95.

Online business owners said the new price scheme meant they could no longer compete with international sellers.

Bookstore owner Chris Elworthy from Port Macquarie said he would now have to pay $11.70 in postage to send an $8 paperback book.

Booksellers in the UK can send the same book to Australia for around $3.

"They are bleeding us dry," he said. "Why would people buy from Australia when they can buy from overseas?"

Online retailer Tabitha Fernando, who sells handmade clothes and nappies from Brisbane, said Australia Post's price increase was a "direct hit" on online shopping.

"It's really upsetting to a lot of people," she said.

The price of a 500 gram prepaid package was $6 when she launched her online business three years ago. As of Monday, Ms Fernando would have to pay $8.35.

"We are being forced out," she said. "I'm seeing New Zealand postage prices and it's cheaper [for consumers] to buy from there than here."

Consumer watchdog Choice demanded answers from Australia Post, saying the additional costs would be passed through to consumers.

"They have a fundamental responsibility to explain this," Choice's head of campaigns Matt Levey said.

"They are operating in an environment where people are buying domestically online at a faster rate than overseas."

Australia Post's changes come in the face of increased competition in the parcel delivery business, with online shopping in Australia now worth $13.1 billion, according to National Bank Australia.

On Monday, Toll Group signed up with the technology group TZ, chaired by Mark Bouris, to implement a locker system for online retail parcel deliveries, to begin in May.

This would give online shoppers access to their parcels via convenience stores, petrol stations, corporate and retail buildings and office parks across Australia.