Commentary: UPS Shipping Price Rate Hikes
On Sept. 1, UPS announced that effective Dec. 26, 2016, the UPS U.S. Ground service daily rate will increase by an average net 4.9%. Additionally, UPS Freight announced an average net 4.9% general rate increase effective Sept. 19, 2016.
The most important part of this story isn’t that rates are rising. This move comes as no surprise, given that carriers are feeling the stress of rapid ecommerce sales growth. Rather, the larger issue is that retailers need to become more effective at managing a larger network of carriers to save money, offer customers more options, and deliver a better customer experience.
When retailers optimize their carrier network, they not only get the benefit of reduced cost, they also experience increased speed, quality, and service levels. This focus on optimization is especially important for sellers of large-items and those items that can ship in various modes (i.e. Parcel or LTL).
Earlier this year, UPS and FedEx modified their additional handling accessorials, increasing the cost to ship any package with the longest side measuring greater than 48 inches (down from 60 inches).
These changes mean that many more packages will have increased shipping costs heading into the holiday season. If retailers are not prepared, these costs will either eat into their margins, or have a direct impact on conversion rates as these costs get passed on to customers.
Retailers that offer more delivery options and that are more transparent about shipping costs will be able to continue to offer free shipping at margins that make sense, recoup the cost of shipping upgrades, and deliver a better customer experience that drives conversion and loyalty.