UPS is set to raise U.S. ground and air shipping rates by an average of 4.9 percent.
Retailers will be asking Santa for a lot this Christmas, in an effort to counter the plans of UPS to raise U.S. ground and air shipping rates by an average of 4.9 percent beginning December 26. The UPS Freight division already announced an average net 4.9 percent general rate increase effective September 19. And later this month, FedEx is also expected to announce hikes in its own shipping prices an average of 5 percent, Oppenheimer analyst Scott Schneeberger told Fortune.
In a press release, UPS officials stated, “UPS continues to make investments in the speed, scope and coverage of our transportation network. Rate increases will support ongoing expansion and capabilities enhancements, while UPS strives to maintain the high service levels customers expect.”
Fortune reported that shipping costs have skyrocketed over the past ten years, with the price of ground shipping for both FedEx and UPS growing 79.2 percent. Air shipping rates have risen 95.5 percent in the same time frame, according to data from transportation software provider, Lojistic.
In March, FedEx told the Wall Street Journal that the cost of e-commerce deliveries would rise to offset the cost of ground shipments, as Innovative Retail Technologies reported. With the continued expansion of ecommerce, buoyed in part by omnichannel efforts at many brick-and-mortar stores, the costs are significant, particularly for those retailers offering low or zero shipping fees for orders and returns. It is a hard balance to maintain, as customers are increasingly demanding their products fast and at the lowest possible shipping fees.
“There’s an enormous interest in people having things delivered to themselves. It does not change, one iota, the input costs of the delivery,” chief executive officer Fred Smith said. Expanding on this was their CFO Alan Graf, Jr., who stated that “we can’t build these networks and spend this kind of capital and not get a return on it,” in response to the increase in ground deliveries and consumer expectations.
And rising shipping costs add more headaches to retailers already struggling to win over finicky customers who want their merchandise delivered fast, free, and conveniently. And while larger retailers like Amazon are often able to negotiate around such rate hikes, they will definitely affect the smaller businesses and individual sellers the most. In a recent Innovative Retail Technologies consumer survey, “The Cost of Poor Delivery: Four Steps To Go from ‘Cost Center’ To ‘Competitive Advantage,” 70 percent of the 500 consumers surveyed say they are unlikely to return to a retailer if they have a negative delivery experience, demonstrating the power of delivery in affecting the customer relationship.
