With coming rate increases of 3-5% across the various carriers’ services, it pays to take a close look at your shipping practices as you prepare for 2017.
UPS changes go into effect first, on Dec. 26, 2016, with average increases of 4.9% on shipping rates and 4.6% on their residential surcharge. FedEx follows on Jan. 2, 2017, with an average 4.4% on shipping rates and 5.1% on their residential surcharge. Finally, on Jan. 22, 2017, USPS joins in with rate increases of 2.7% – 4.9% across their various services (USPS does not impose surcharges).
While nearly every rate for every service is going up, there are plenty of ways to help you mitigate the impact on your shipping costs. In fact, in a study of ShippingEasy clients, we found that almost half had opportunities to actually reduce shipping costs by simply re-evaluating their carrier and service selection process.
Here are the main areas you may find opportunities to reduce the impact of the coming changes or perhaps even ship some packages for a net lower cost than you did in 2016:
Now is definitely the time of year to re-evaluate—and potentially re-negotiate—your carrier relationships.
Many online sellers invest in UPS and/or FedEx due to a cachet they associate with those brands, when in fact their customers care more about getting their packages on time and intact—metrics on which all three carriers perform relatively evenly. If this describes you, take a second look at USPS, which offers better deals for virtually every delivery timeframe, package size, and distance.
Regardless of what carrier(s) you use, it’s also a good time to take a closer look at your rates. If you are using USPS, you probably qualify for Commercial Plus Pricing. To learn more about Commercial Plus Pricing, and if you qualify, click here. If you use FedEx and/or UPS, talk to your account representative to ensure you are getting the best possible rates based on your shipping volumes. If you have an exclusive deal with one carrier, now’s a great time to see if switching your allegiance to another might result in better negotiated rates.
If you use multiple carriers, compute the costs using 2017 rates for a random sampling of last year’s shipments to see if there are opportunities to lower the impact of the rate increases by simply switching to a different carrier. For examples of how to effectively do this, take a moment to review some case studies in the 2017 Rate Change Guide.
In an analysis of ShippingEasy client shipments, it was found that carrier selection played a role in the cost savings for more than one-third of the shipments that could be done for lower cost in 2017.
If you offer guaranteed-delivery-timeframe options, consider how important the guarantee is to your customers, especially if you offer a 2-day option. For items weighing less than a pound, USPS First Class Package Service pricing can’t be beat—and is advertised as a “1-3 day” service by USPS. For larger packages, USPS Priority Mail® is advertised as a 2-3 day service, and is cheaper across the board than the standard pricing for any guaranteed 2-day offering from UPS or FedEx.
While some of your packages may take three days to arrive via Priority Mail, a similar number will probably arrive overnight. The USPS mapping tool makes it easy to estimate the delivery time. Given that Priority Mail rates are typically 50-75% lower than Fedex and UPS second-day service rates, it’s worth considering the USPS option. If you decide to switch, you can recast your 2-day shipping option as a 2-3 day option on your webpage.
As an added bonus, USPS will deliver free shipping supplies for Priority Mail directly to your door.
An often overlooked opportunity to lower shipping costs lies in optimizing packaging.
For larger packages, both FedEx and UPS are lowering their dimensional weight divisor, which ultimately means that if you ship large packages with these carriers your rates may be going up, providing an incentive to ensure you are not using larger-than-necessary packages. For a good explanation of dimensional weight and the coming changes, check out this article from Logistics Management.
Even if your packages aren’t large enough to be subject to dimensional weight rules, you can likely find opportunities to save by using Regional Rate boxes or USPS Flat Rate boxes or envelopes, all of which are options for Priority Mail service. USPS Flat Rate Boxes and envelopes are available in over a dozen sizes and styles, and allow you to ship any contents that fit into them up to 70 pounds to any zone for a single price.
Priority Mail Regional Rate Boxes come in four styles and sizes and allow shipment of contents up to 15 pounds (Box A) or 20 pounds (Box B) for a rate that varies only according to destination zone, and is often lower than the same rate for a similar custom-boxed package.
In an analysis of ShippingEasy client shipments, it was found that packaging selection played a role in the cost savings for almost two-thirds of the shipments that could be done for lower cost in 2017. In one case, switching to a flat-rate box would save she shipper over 60%!
With the significant rate changes, optimizing shipping operations for 2017 is more important than ever. Carriers have been forthcoming with information, but having that information out there is not enough. E-commerce sellers need to take the time and make the effort to fully understand the changes in order to come up with a strategy to make sound shipping decisions in order to sustain and build business.
ShippingEasy provides cloud-based shipping, inventory management, and customer management technology for online sellers.Favorite