General rate hike coming from UPS & FedEx
UPS & FedEx rate changes are typically very similar: the increases to their rates and surcharges are nearly identical and are typically made live within days of each other. The USPS annual rate change is unique and is usually initiated later. When USPS makes their announcement, we’ll be sure to talk about it here.
For 2017, these changes are coming on December 26th and January 2nd for UPS and FedEx respectively.
For UPS, you can see the changes on their 2017 upcoming rate increases page. The most important to note is the 5.0% average net increase across UPS Ground and Air services – two frequently used services for eCommerce sellers.
Residential Surcharges are going up
The infamous residential surcharge, a fee which UPS & FedEx add to their shipping services when a shipment’s final destination is a residential address – this is in addition to any postage and surcharges you’re already paying. If you’re an eCommerce seller, it’s likely that nearly all of your orders will be delivered to residential addresses meaning that if you’re shipping these orders with UPS or FedEx, the shipment will include this surcharge.
The “last mile” a package has to travel is actually a huge deal in the shipping industry, and gives delivery companies like UPS and FedEx a massive headache because making it into every neighborhood requires more trucks. To make sure they aren’t constantly losing money on every shipment due to last mile delivery, they add a surcharge to every shipment that goes to a residential address.
Both UPS & FedEx will increase their rates on various charges, including the residential surcharge. The rate for residential surcharge is increasing by $0.15 for UPS and $0.20 for FedEx. This brings the UPS Ground Residential Surcharge to $3.50 and FedEx Ground Residential Surcharge to $3.45.
It’s worth noting that USPS can avoid adding a residential fee because their postal workers visit practically every residence in the US on a daily basis anyway to deliver the mail. Adding an eCommerce package or two to their delivery load isn’t a huge burden, therefore they are able to completely eliminate the need for a residential surcharge fee.
Big change to dimensional weight from FedEx
Dimensional weight can be confusing and generally means you’re paying more for postage than you expected. For these reasons, it’s understandable that eCommerce sellers don’t want to deal with it. If you’re not familiar with how dimensional weight works, once your box gets over a certain size, you’re essentially charged for the size of the box regardless of the weight. This means that you pay a higher rate than if you were allowed to calculate the cost by the actual weight of the contents alone. Confusing, huh? For example, a 10” x 10” x 10” box has a minimum dimensional weight of 7 lbs, and even if your shipment is 3 lbs, you’ll be charged a 7 lb rate.
FedEx Ground will be changing their formula for calculating dimensional weight. The divisor is changing from 166 to 139. This puts domestic shipments in the same formula as international shipments, and effectively will increase the dimensional weight of most packages going forward. Referring back to our 10”x10”x10” box example it will now have a dimensional weight of 8 lbs.
It is unclear at the moment if UPS will be making a similar change; but if I had to bet, I would say they will do the same as FedEx eventually.
Another year, another set of rate increases. The increase to the cost of residential delivery and the change to dimensional weight will potentially mean major shipping cost increases for eCommerce sellers. In turn, this may affect USPS package shipping efforts that don’t yet consider Dimensional Weight in their Priority Mail service. For now, it’s good to know your options. If all of your shipments require residential delivery, it could be worth looking into one that doesn’t charge more for it. Oh, and if you can fit your lighter products in smaller boxes, it could be worth the packaging change.
Stay tuned for any news on USPS rate changes as well. Happy shipping!
http://images.fedex.com/us/services/pdf/FedEx_StandardListRates_2017.pdf – FedEx 2017 Rates
http://rates.ups.com/ – UPS 2017 Rate Change Information
http://rates.ups.com/surcharges.html – UPS Surcharge Rate Change information
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