You Too Can Offer Free Shipping

Consumers and carriers are squeezing e-tailers: customers expect free shipping and carriers keep raising prices.

On one hand, UPS and FedEx pricing has risen approximately 20 percent over the past three years. Surcharges like residential add-on fees and delivery area surcharges are up 20 percent to 30 percent since 2009. Fuel surcharges alone have doubled compared to this time last year.

On the other hand, online shoppers insist on free shipping. According to a recent National Retail Federation study, consumers’ No. 1 purchase incentive is free shipping. When asked to choose from the five most popular promotions when shopping online, 85 percent chose free standard shipping without conditions. In fact, free shipping was chosen 166 percent more than the next best promotion. As a result, shipping for many e-commerce companies is a loss leader.

Compounding the problem is the fact that a growing number of online orders are delivered to residences. Delivering packages to a residence is more costly than delivering to a business address because driver and fuel costs are higher outside of high-density commercial routes. Carriers are forced to recover costs through residential surcharges (up to $2.75), delivery area surcharges (up to $3) and other accessorial charges that often account for more of the total cost than the freight charges.

In short, residential shipping costs are skyrocketing out of control while online shoppers want free shipping. What’s a shipper to do?

Fortunately, you have several delivery options outside of the private parcel carriers, including the U.S. Postal Service and parcel consolidators.

No longer a “one price fits all” shop, the USPS offers a variety of pricing formats including retail, online, volume-based, weight/distance-based, and flat and regional rate products. Moreover, if you spend at least $2 million in annual shipping costs, you can negotiate custom pricing with the USPS.