What Shipping Rate Increases Mean for Online Retail

Online retailers know all too well how expensive it can be shipping products to their customers and it’s getting even pricier. Over the last six months, the big three carriers—FedEx, UPS, and USPS—have made shipping rate increases. This is a concern for both retailers and consumers alike and leads to the bigger question, “What does this mean for online retail?”

USPS

• Priority Mail increased by nearly 10%.
• Prices for Parcel Select Lightweight increased by 23%. Parcel Select Lightweight is the lowest-priced shipping option that USPS offers and is exclusively for shipments booked online.
• First Class Package International Service rates increased by 21.6%.

UPS

• UPS Ground rates and accessorial charges went up by an average of 4.9%.
• UPS Air and International services and accessorials, including UPS Air Freight rates within and between the United States and Canada increased by an average net of 5.2%.
• UPS Freight, the company’s less-than-truckload (LTL) segment, rates increased 4.9%.

FedEx

• FedEx Ground, Express, Home Delivery, and Freight rates increased by about 4.9%. The freight shipping rates are for destinations within the US (including Hawaii, Alaska, Puerto Rico and Virgin Islands), between the US and Canada and the US and Mexico.
• Increased surcharge for “unauthorized packages” that exceed defined size requirements, which rose from $57.50 to $110.

According to the report, by L2 and titled "Death of Pureplay Retail," retailers with only an eCommerce presence are severely disadvantaged by the high costs of marketing and shipping. These shipping rate increases make it even harder for these types of retailers to sustain their business and have long-term growth without a brick-and-mortar presence, which could push some retailers to open up physical retail locations, like formerly online-only companies Birchbox and Bonobos. Depending on how these shipping rate increases impact the online retailer it may encourage retailers to look at alternative shipping options, such as additional carriers or technological solution. The last-mile fulfillment marketplace is thriving, especially as customers are coming to expect next- and two-day shipping, and are a potential solution for eCommerce since there are multiple providers competing to provide the fastest delivery for the lowest price. Thankfully, online retailers have no shortage of options should they choose to explore alternative solutions to standardized shipping.

(Source: BI Intelligence)