Not waiting until the start of the New Year, some of UPS’s rate increases will take effect starting in December 2017. With the growth of ecommerce and B2C shipping volumes, UPS placed its increases on the services these types of businesses use most. And, by raising rates before the start of 2018, the company will be poised to take advantage of the holiday return and post-holiday shipping rush. UPS feels that the raised rates are needed to meet the increasing demands of ecommerce businesses and quicker delivery turnaround times of their customers.
While shipping costs are going up by 4.9% on average, SurePost, which is the service that partners with the USPS, will be seeing higher rates than the other services. The most significant increases are focused on Air shipments, particularly for the higher-zone shipment types. With the minimum rates for SurePost exceeding those for Ground services, the marketplace feels that the reliability of the USPS is acceptable, or it’s not willing to pay premium prices.
Shippers can also expect to pay more for small packages, as the DIM weight advisor for packages measuring < 1 cubic foot will decrease from 166 to 139, putting UPS on equal ground with FedEx. This makes it cost-prohibitive to ship larger, lightweight packages.
UPS is looking to drive more revenue from both surcharges and services, particularly in the 2- and 3-Day services. The more substantial Service Minimum increases that are focused on 2- and 3-Day services indicates that the company’s Ground network is becoming more efficient; the volume of packages in those lanes serviced with Ground, as opposed to Freight, is growing. Shippers are also getting savvier about their shipping choices, using Ground for 2- and 3-day shipments so they do not have to pay premium rates. By increasing the cost for these services, UPS is able to protect its margins with Air service that is needed to meet a 2- or 3-day commitment.
These increases, just like the company’s Peak Season Surcharges, indicate that UPS is ready to capitalize on the ecommerce market. Those ecommerce businesses that ship large and cumbersome packages will pay a premium. Shippers will be forced to review all of their shipping profiles and analyze how these changes will affect their shipping budgets into 2018. Modeling your shipping patterns with the new rates will give your company insight as to how these rates will impact your bottom line, and what changes you will have to make with your shipping carriers.