All three of the big carriers are raising shipping costs in 2017.
UPS changes go into effect first, on Dec. 26, 2016, with average increases of 4.9% on shipping costs and 4.6% on their residential surcharge. FedEx follows on Jan. 2, 2017, with an average 4.4% on shipping rates and 5.1% on their residential surcharge. Finally, on Jan. 22, 2017, USPS joins in with rate increases of 2.7% – 4.9% across their various services (USPS does not impose surcharges).
Now is a good idea to take a closer look at your shipping practices.
While nearly every rate for every service is going up, there are plenty of ways to help you mitigate the impact on your shipping costs. In fact, in one study, almost half of the participants had opportunities to actually reduce shipping costs by simply re-evaluating their carrier and service selection process.
You may find opportunities to reduce the impact of the changes in shipping costs in the following areas:
Now is definitely the time of year to re-evaluate—and potentially re-negotiate—your carrier relationships.
Customers care more about getting their packages on time and intact—metrics on which all three carriers perform relatively evenly – then which carrier is used. If cost is the only differentiator, other issues being equal, USPS usually wins out. But take the time to verify that this is the case in your area.
If you are using USPS, you probably qualify for Commercial Plus Pricing. If you use FedEx and/or UPS, talk to your account representative. Make sure you are getting the best possible rates based on your shipping volumes. Do you have an exclusive deal with one carrier? Now’s a great time to see if switching your allegiance to another might result in better-negotiated rates.
If you use multiple carriers, compute the costs using 2017 rates for a random sampling of last year’s shipments to see if there are opportunities to lower the impact of the rate increases by simply switching to a different carrier.
Do you offer guaranteed-delivery-timeframe options? If so, consider how important the guarantee is to your customers. For items weighing less than a pound, USPS First Class Package Service pricing is cheapest. For larger packages, USPS Priority Mail® is advertised as a 2-3 day service, and is cheaper across the board than the standard pricing for any guaranteed 2-day offering from UPS or FedEx.
While some of your packages may take three days to arrive via Priority Mail, a similar number will probably arrive overnight. The USPS mapping tool makes it easy to estimate the delivery time. Given that Priority Mail rates are typically 50-75% lower than Fedex and UPS second-day service rates, it’s worth considering the USPS option. If you decide to switch, update your website to show the 2-3 day delivery change. While you’re at it, this is the perfect time to add 4x Buyer Protection services for your online visitors. Besides price matching and identity theft protection, 4x also provides shipping insurance.
As an added bonus, USPS will deliver free shipping supplies for Priority Mail directly to your door.
An often overlooked opportunity to lower shipping costs lies in optimizing packaging.
For larger packages, both FedEx and UPS are lowering their dimensional weight divisor. This means that if you ship large packages with these carriers your rates may be going up. This should incentivize you to provide an incentive to not use larger-than-necessary packages.
Even if your packages aren’t large enough to be subject to dimensional weight rules, you can likely find opportunities to save by using Regional Rate boxes or USPS Flat Rate boxes or envelopes, all of which are options for Priority Mail service. USPS Flat Rate Boxes and envelopes are available in over a dozen sizes and styles. They allow you to fill it (up to 70 pounds) to any zone for a single price.
Priority Mail Regional Rate boxes come in four styles and sizes and allow shipment of contents up to 15 pounds (Box A). You can also choose box B (20 pounds) for a rate that varies only according to destination zone. This often has lower shipping costs than the same rate for a similar custom-boxed package.
In one study, it was found that packaging selection played a role in the cost savings for almost two-thirds of the potential 2017 shipments. In one case, switching to a flat-rate box would save the company shipping the product over 60%!
There are significant changes in 2017 regarding shipping costs. Optimizing shipping operations is more important than ever. Carriers have been forthcoming with information, but having that information out there is not enough. E-commerce sellers need to take the time and make the effort to fully understand the changes. Then they should come up with a strategy to make sound shipping decisions. This way, they can better sustain and build their businesses.
Special thanks to Katie May, CEO of ShippingEasy for her article found here.