Managing Carrier Rate Uncertainty
Parcel carriers are increasing their rates again. Unfortunately, that’s not surprising to most of us in the e-commerce industry. Over the past few years, retailers have been forced to deal with near-annual rate increases from UPS, FedEx and USPS.
However, even small rate increases can translate into thousands of dollars in additional expenses that jeopardize online retailers’ profitability and threaten their ability to compete in a crowded retail marketplace.
Savvy e-commerce brands know that rate uncertainty isn’t an acceptable option. To grow, retailers need predictable shipping rates and the kind of stability that third-party logistics (3PL) partners can help provide.
Post-Holiday Carrier Rate Increases
"The big three" parcel carriers have a track record of increasing rates after the holiday season — a trend that will continue this year. In January 2016, USPS increased rates on flat-rate priority boxes and other specialty shipping options by 9.5 percent. Recently, USPS announced that flat-rate shipping will go up again, with an average 3.9 percent increase scheduled to take effect after the holiday mailing season.
USPS isn’t the only major carrier with scheduled rate increases. UPS rates for U.S. Ground, U.S. Air and International packages will increase by an average of 4.9 percent on Dec. 26. Not to be outdone, FedEx will increase its Ground and Freight shipping by an average of 4.9 percent on Jan. 2, 2017.
Carrier rate increases are more than simply the cost of doing business. Constant rate hikes threaten customer relationships because the retailer must either absorb the increase or pass it along to customers, neither of which is an attractive option for growing e-commerce brands.
How 3PLs Help Manage Carrier Rate Uncertainty
As the e-commerce sector continues to evolve, third-party logistics partnerships are emerging as a viable strategy for managing the impact of carrier rate uncertainty. With the right 3PL partner, brands across a range of retail categories are better equipped to handle shipping rate volatility. Consider the following benefits:
- Lower negotiated rates: An experienced 3PL partner gives brands and retailers leverage. Third-party logistics firms specialize in forming long-term relationships with carriers and can secure bulk discounts that shield your customers and your business from unstable shipping prices. The best 3PLs also have technologies that enable them to shop rates in real time, ensuring that each of your packages is shipped at the best possible price.
- Expanded packaging options: Partners that provide fulfillment and logistics services for e-commerce can help evaluate your current packaging and develop attractive alternatives that reduce shipping costs. For example, by transitioning from boxes to polybags, certain types of retailers can minimize the impact of FedEx’s dimensional weight price increases.
- Improved process efficiencies: Although it may be impossible to completely control the impact of carrier rate increases, an experienced partner can help make your fulfillment processes more efficient. Even minor changes in inventory management, pick and pack, or other parts of the operation can translate into significant cost savings.
Online retailers are paying closer attention to costs than ever before. As more and more competitors enter the digital marketplace, the name of the game isn’t limited to increasing market share — it’s also about finding ways to leverage bottom-line improvement for brand growth.
Third-party logistics providers are an important resource for managing shipping costs and ensuring that shipping capabilities align with customer expectations. For more e-commerce shipping advice, check out the tip sheet we developed at Dotcom Distribution to help online retailers create smoother and more efficient shipping processes.
Maria is CEO and co-founder of Dotcom Distribution, where she has played an integral role in developing and defining all aspects of the operation, including sales and marketing, operations, finance and IT. Her strategic leadership helps the Board and senior management to establish long-range goals, strategies, plans, and policies. Maria has developed the systemic and procedural infrastructure necessary to provide timely and accurate analysis of budgets, financial reports and financial trends in order to assist the Board, senior executives and clients in performing their responsibilities. Maria holds a CPA. Prior to founding Dotcom, she began her career as an Auditor at Arthur Andersen and was the CFO of GoodTimes Home Video.