Sep 30, 2021
While the escalating costs of shipping goods across the ocean grabbed the headlines, ongoing rate hikes and charges from FedEx and UPS continue to more quietly increase the cost of delivering the. last mile.
FedEx September 20 noted it plans to increase shipping rates by an average of 5.9%, starting in early 2022. The rate hike marked the first time in eight years that FedEx or UPS has exceeded annual increases by 4.9% .
The jump reflects inflationary pressures and the carrier’s pricing power. “The continued limited capacity in the US domestic and international markets has led to a very favorable pricing environment,” said Brie Carere, Executive Vice President, FedEx cmarketing and communication manager, on a quarterly call.
UPS is expected to announce a similar rate increase in 2022 in the coming weeks, as the two carriers have mimicked each other’s price changes for at least a decade.
FedEx and UPS regularly add surcharges and other fees as online delivery has remained high since the start of the pandemic. Both recently has announced supplements throughout the upcoming holiday season due to expected lingering strains on capacity.
FedEx and UPS prioritize more profitable shipments from small and medium businesses. Large e-commerce shippers who have historically achieved larger shipping discounts are seeing their rates increase as carriers seek to both increase revenue and free up capacity.
A the Wall Street newspaper The article noted that some e-commerce players are using fees to offset rising costs. Fanatics charges a handling fee of $ 1.99 to cover storage and packaging costs.
Some shipments are diverted to regional carriers, although capacity is limited. Some can be moved to the United States Postal Service (USPS), although the agency is also regularly increase rates and fair announcement plans to slow deliveries. The Newspaper article said eliminating free shipping offers could be considered given cost pressures.
“It’s a real dilemma,” said John Haber, president of package consulting at Transportation Insight. WSJ, “because you have to compete with Amazon and Amazon is not going to stop offering free shipping.”
DISCUSSION QUESTIONS: Are rising shipping rates and fees a temporary or long-term problem for online sellers and e-commerce profitability? What steps do you see retailers and consumer brands taking to alleviate cost pressures?
“This is a long term problem for the industry, but many retailers are treating it with short term solutions.”