Future of Commerce Blog

UPS & FedEx Announce Shipping Rate Changes

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If you’re a retailer or supplier who uses FedEx or UPS for drop shipping, this news could impact you and your customers. Both of the big players in the parcel delivery service industry have announced rate hikes to take effect after the winter holiday mailing season has ended. UPS’s rates will increase on December 26, 2016, while FedEx’s rates will change be in effect starting on January 2, 2017.

UPS shipping rate changes

UPS made its announcement at the beginning of September, indicating that the late December rate increases will support the company’s ongoing expansion of service coverage and enhance capabilities. The company listed the rate changes as follows:

  • UPS U.S. Ground service Daily rate will increase by an average net 4.9 percent.
  • Daily rates for UPS U.S. Air and International services will increase an average net 4.9 percent.
  • UPS Air Freight rates within and between the U.S., Canada and Puerto Rico, will increase an average net 4.9 percent.
  • UPS Freight also rolled out an average net 4.9 percent general rate increase effective September 19, 2016.

Additionally, UPS has changed the measurements of which large packages require an additional handling fee. All Air and International packages exceeding 48 inches on the longest side will now incur a handling fee, whereas the previous measurement had been 60 inches. The handling fee is also increasing from $10.50 to $10.85.

Effective January 8, 2017, the additional handling surcharge will also apply to UPS SurePost packages.

FedEx shipping rate changes

FedEx had the benefit of announcing its rate hike after UPS made its announcement. Perhaps that had an impact on how much FedEx raised their rates? On September 19, FedEx announced that in the New Year:

  • FedEx Express will increase shipping rates by an average of 3.9% for U.S. domestic, U.S. export and U.S. import services.
  • FedEx Ground and FedEx Home Delivery will increase shipping rates by an average of 4.9%.
  • FedEx Express and FedEx Ground U.S. domestic dimensional weight divisor will change from 166 to 139.
  • FedEx SmartPost rates and FedEx SameDay City pricing changes for calendar 2017 will be announced later this year.
  • FedEx Freight within and between the U.S., Canada and Puerto Rico, will increase an average of 4.9%.
  • The FedEx Freight Extreme Length surcharge will change from $85 to $150 and will be applied to shipments with dimensions of 12 feet or greater versus the prior 15 feet.
  • Effective February 6, 2017, FedEx Express and FedEx Ground fuel surcharges will be adjusted on a weekly basis. This change will result in a closer alignment between fuel costs and fuel surcharges at the time of shipment.

Like UPS, FedEx made a similar package size change for its additional handling fee back on June 1, 2016, though no change to its price of $10.50 has been announced at this time.

Consumers demand more drop shipping

More and more consumers are doing their shopping online, making drop shipping a priority for retailers who want to keep their customers happy. The popularity of online shopping comes with a cost, though.

Over the last 10 years, the price of shipping packages has grown by 79.2% for ground deliveries and 95.5% for air deliveries, according to Fortune. Larger companies such as Walmart or Amazon are better positioned to absorb such shipping costs. Smaller retailers, though, may have to start including more of the cost of shipping services with the price of products, which could make it tougher to compete online. With e-commerce sales growing each year and expected to account for almost 13% of all retail sales by 2019, it’s better to be proactive now about a solution.

Fulfillment solutions help retailers of all sizes

Fulfillment solutions can streamline the customer shopping experience, while taking the responsibility of fulfillment out of the retailer’s hands and into the supplier’s. With the supplier responsible for shipping, it may lead to more predictable ands stable pricing for products. Additionally, the Fulfillment (EDI) solution can help retailers scale e-commerce, reduce inventory storage costs and grow product assortment simply by adding new vendors.

This post was originally published on SPS Commerce’s blog.

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