United Parcel Service Inc. announced its 2020 rate increase Monday. The fulfillment and shipping company will increase its rates 4.9% for UPS Ground, UPS Air and International services, UPS wrote on its website. The new rates take effect Dec. 29, 2019.
The rate hike is needed to support expansion and capability enhancements, the delivery company writes. For example, UPS has increased its service to seven days a week and is adding more of its UPS Access Points for customers to drop off and pick up packages.
FedEx also in September announced a 4.9% rate hike for FedEx Ground, FedEx Express, and FedEx Home Delivery to go into effect in January 2020.
“I suspect that both companies operate a similar mix of assets and processes. Today’s supply chain is more expensive because it requires third-party logistics to manage a complex cocktail,” says George Lawrie, vice president and principal analyst at Forrester Research.
Retailers will now “be figuring out how the new UPS 2020 list rates will impact shipping spend, then working out whether they can renegotiate them, pass them onto customers or mitigate them through reorganization,” Lawrie says.
UPS reported revenue for the third quarter ended Sept. 30 increased 5.0% to $18.32 billion, compared with $17.44 billion in Q3 2018. It credits the increase in sales to an uptick in U.S. average daily volume, which grew 9% year over year and its next-day air volume increased nearly 24%. For the nine months ended Sept. 30, UPS reported revenue of $53.52 billion, a 2.9% increase over $52.01 billion in the comparable period last year.
In July, UPS announced it was adding Sunday pickup and delivery for 2020, likely to compete with FedEx Inc., which announced its own seven-day service in May.
UPS in July also said it was adding more Access Points, including 6,000 CVS Health Corp. stores (No. 131 in the Internet Retailer 2019 Top 1000). Other access points include The UPS Store and crafts retailer Michaels Cos. Inc. (No. 248), which rolled out UPS Access Points at more than 1,100 stores this past October.
UPS says it currently operates more than 9,000 Access Points in the United States and 29,000 globally. Those numbers will grow to 21,000 in the U.S. and 40,000 globally when locations at Michaels, CVS and Advance Auto Parts are fully deployed next year. The current UPS Access Points also include 279 locker locations and more than 3,000 small businesses.
For the holiday season, UPS also plans to reward its UPS My Choice members who use its Access Points through Jan. 12, 2020. Members with eligible package deliveries can receive up to $15 redeemable for a Target eGiftCard and up to six free months of UPS My Choice Premium service, which offers upgraded delivery options—a $20 value. To earn rewards, My Choice members log into their account and select the most convenient Access Point location as their preferred alternate delivery location. For example, after a member picks up one package from an Access Point, she is rewarded with one month of UPS My Choice Premium. After picking up her third package, she receives a $5 Target eGiftCard. And so on.
UPS is the No. 1 shipping carrier used by 266 retailers in the Top 1000, according to the recently released Leading Vendors to the Top 1000 Report. 198 retailers use FedEx, ranked No. 2, and 193 use USPS, ranked No. 3.
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