Katie May, CEO, ShippingEasy
The bad news is that, once again, shipping rates are going up. The good news is you can ship smarter to mitigate the impact of the increases.
UPS changes go into effect first, on December 24, 2017, with average increases of 4.9% on shipping rates and 4% to 6% on residential surcharges. FedEx follows on January 1, 2018, with an average of 4.9% on shipping rates and 4% to 8% on their residential surcharges. Finally, on January 21, 2018, USPS joins in with rate increases of 3.9% to 6.1% increases across their various services (USPS does not impose surcharges).
For the last several years, ShippingEasy has studied the impact of these annual carrier price increases on our clients by looking at the anonymized shipping data that flows through our software. And, we’ve noticed a trend: with each annual carrier price increase, shippers have gotten progressively smarter about shifting to the lowest-cost shipping options.
Based on our analysis, here are the main areas where you may find opportunities to reduce the impact of the 2018 increases—or perhaps even ship some packages for a net lower cost than you did in 2017:
Carriers
Our analysis indicates that some higher-volume shippers are negotiating better rates with UPS or FedEx, both of whom negotiate rates one-on-one with their clients. And our research also shows that USPS continues to gain market share with its Priority Mail products and services.
It seems that many shippers have come to the conclusion that what customers really care about is receiving their packages on time and intact—metrics on which all three carriers perform relatively evenly. Paying more for the brand cachet of UPS and/or FedEx is difficult to justify in a world where shipping cost is the difference between order conversion and an abandoned cart. It is increasingly understood that USPS offers better deals for virtually every delivery timeframe, package size, and distance especially when residential surcharges are factored in.
If you are using USPS, determine if you qualify for high-volume discounts under the USPS Commercial Plus Pricing program. If you use FedEx and/or UPS, talk to your account representative to determine if you are getting the best possible rates based on your shipping volumes.
Another way to potentially lower the impact of the rate increases—especially if you use one carrier exclusively—is to consider changing carriers. If you are exclusive with either UPS or FedEx, check with the one you’re not using to see if they can offer better overall terms—or even better terms for certain shipping parameters. If you aren’t using USPS at all, it definitely pays to take a look at them. For examples of real-world shipping scenarios where changing carriers will make a difference for 2018 shipping costs, take a moment to review the case studies in the ShippingEasy 2018 Shipping Rate Change Guide.
Delivery Timeframes
If you offer a 2-day guaranteed delivery option, consider how important the guarantee is to your customers. For items weighing less than a pound, USPS First Class Package Service—advertised as a “1-3 day” service by USPS—offers pricing that can’t be beat. For larger packages, USPS “1-3 day” Priority Mail® is cheaper for all packages 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.
It’s important to note that additional features of Priority Mail include free Saturday delivery, free insurance, and free shipping supplies delivered directly to the door.
Packaging
For larger, less dense packages, both FedEx and UPS are expanding dimensional pricing in some way: FedEx by applying it to SmartPost shipments, and UPS by lowering the dimensional weight divisor to 139” for all packages regardless of volume.
For packages that aren’t large enough to be subject to dimensional weight rules, you might find opportunities to save by using USPS Flat Rate Boxes and envelopes, which are available in over a dozen sizes and styles, and allow you to ship any content up to 70 pounds that fits into them to any zone for a single price.
You may also consider Priority Mail Regional Rate Boxes, which 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 is often lower than the same rate for a similar custom-boxed package, and that varies only according to destination zone.
Conclusion
Annual carrier rate increases have become a standard part of doing business for e-commerce sellers, but bearing the full cost of them doesn’t have to be. If you take the time to fully understand the coming changes and how they apply to your specific shipping scenarios, chances are you’ll find opportunities to mitigate their impact going into 2018 and beyond.
ShippingEasy is a provider of cloud-based shipping, inventory management, and customer marketing technology for e-commerce sellers.
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