Shipping Rates Are Changing — Are You Ready?
As they do every year, all the major carriers are raising their shipping rates for 2018. UPS raised shipping rates an average of 4.9 percent and residential surcharges 4 percent to 6 percent starting Dec. 24, 2017, while FedEx raised shipping rates an average of 4.9 percent and residential surcharges 4 percent to 8 percent starting Jan. 1, 2018. The U.S. Postal Service raised its package rates 3.9 percent to 6.1 percent starting on Jan. 21, 2018 (USPS doesn't impose surcharges).
For the last several years, ShippingEasy has been studying the (anonymized) data that flows through our software to understand how to mitigate the impact of the annual shipping rate increases on real-world shipping scenarios.
In general, this data shows that our clients are responding to the rate increases by shipping smarter. They do this by optimizing the three main shipping parameters:
- Choice of carrier: UPS and FedEx negotiate rates one-to-one with their clients, and our research shows that higher-volume shippers are increasingly negotiating contractual rates that are significantly lower than the rates available to the average shipper. Our analysis revealed FedEx and UPS negotiated discounts of up to 63 percent, in some cases making the rates more attractive than USPS Commercial Plus Pricing (CPP), which provides the lowest USPS rates available to most shippers. However, in most of the cases we examined, even discounted UPS and FedEx rates could not compete with USPS CPP rates. When it comes to carriers, it pays to both negotiate the best rates you can with UPS and FedEx, AND to look closely at USPS CPP rates, which retailers of any size can skip the negotiations and access directly using online shipping apps.
- Delivery time frames: The majority of the shipping cases we looked at specified a two- to three-day delivery time frame and used either USPS Priority Mail® or USPS First Class™ Package Service, both of which are “1-3 day” services per the USPS. We’ve seen a trend over the last few years of shippers moving away from guaranteed two-day delivery options — which use pricey FedEx or UPS second-day air services — to a “2-3 day” expedited option leveraging USPS services, which are typically 50 percent to 75 percent cheaper. And the USPS services offer additional benefits such as free Saturday delivery, free insurance and free shipping supplies delivered directly to your door.
- Packaging: Our analysis also indicates that shippers are getting smarter about packaging by more frequently taking advantage of USPS Priority Mail Regional Rate® and Flat Rate® packaging materials, which often provide lower rates than using your own packaging. Another packaging consideration that seems to be driving more shippers to consider USPS is dimensional pricing, which all carriers use for packages that meet certain size requirements. Of the three carriers covered in our analysis, USPS has the least restrictive rules related to dimensional pricing.
To see the details of our research, including detailed, real-world case studies, check out our FREE 2018 Shipping Rate Change Guide.
While carrier rate increases have been coming each year as reliably as Cyber Monday deals, smart e-commerce sellers can still find ways to soften their impact by taking the time to fully understand the changes and carefully analyzing their shipping options.
Katie May is CEO at ShippingEasy, a provider of cloud-based shipping, inventory management, and customer marketing solutions for e-commerce sellers of all sizes.
Related story: Analyzing the FedEx, UPS 2017 Holiday Surcharge Increases