Real-World Effects of Shipping Surcharges | ShippingEasy

Real-World Effects of Shipping Surcharges

By Rob Zaleski
Mar 5, 2020
Real-World Effects of Shipping Surcharges

One of the greatest benefits of shipping your e-commerce packages through USPS is not having to pay shipping surcharges on those packages. What you pay when you purchase the label and any insurance you purchase is the final cost. That’s it—easy to budget and plan for. FedEx and UPS both assess shipping surcharges, including but not limited to fuel surcharges, residential delivery surcharges, and oversized package surcharges.

How much of an effect do those really have on merchants? The short answer is that it depends. It depends on what kinds of products you ship, which services through FedEx and UPS you use, the final destination of your delivery, and more. We won’t be able to cover every single example in this article, but we will take a look at some typical examples to demonstrate how much of an impact shipping surcharges can have on your bottom line.

Residential Surcharges

A vast majority of e-commerce shipments are destined for residences. While this is no big deal when shipping with USPS services, it comes with added costs when using FedEx and UPS. Let’s look at an example.

  • UPS Ground, 2 lb to Zone 2 shipping rate: $8.89
  • UPS Ground with Residential Fee added: $8.89 + $4.10 = $12.99
  • FedEx Ground, 2 lb to Zone 2 shipping rate: $8.89
  • FedEx Ground with Residential Fee added: $8.89 + $4.65 = $13.54
  • USPS Priority Mail, 2lb to Zone 2: $7.64

Oversized package surcharge

A major note from the 2020 shipping rate changes is that FedEx and UPS lowered the thresholds they use for assessing oversized package fees. Previously, the limit was 70 pounds, but this year it was lowered to 50 pounds. This has a major effect on merchants who can get hit will a bill for thousands of dollars that they didn’t see coming.

Some merchants had planned their packaging and their shipping around the threshold to make sure they never surpassed it. Without advanced notification about this change, many merchants who sell large or heavy items have found themselves in a bind.

We covered the change in our E-commerce Seller’s Guide to 2020 Shipping Rate Changes, but many merchants say that the move was not widely communicated enough.

“Out of the blue, we get a bill that’s $4,000 more than our weekly bill,” Matt Doll, CEO of American Fireglass said. “We look at it and have no idea what’s going on, so we call our rep and he tells us it was an ‘industry change.’ They had it planned but didn’t tell anyone. Every single person in the industry I’ve talked to so far had no idea this is happening.”

Quoted in Furniture Today

Even just a pound over 50 will cost your business an additional $24 per package, which can add up in a hurry. In previous years, FedEx Ground was often the rate winner for packages 50-70 pounds. With the new fee, let’s look at a couple of scenarios to see if this is still the case.

51-pound package from HOU – MIA (Zone 5)

  • FedEx Express Saver: $139.53 + $24 (oversize) + $4.65 (residential) = $168.18 (not including fuel surcharges)
  • FedEx Home Delivery: $37.35 + $24 (oversize) + $4.00 (residential) = $65.35 (not including fuel surcharges)
  • UPS 3-Day Select: $116.44 + $24 (oversize) + $4.70 (residential) = $145.14 (not including fuel surcharges)
  • UPS Ground: $37.28 + $24 (oversize) + $4.10 (residential) = $65.38 (not including fuel surcharges)
  • USPS Priority Mail: $67.27 (no fees or surcharges)

As noted, the above does not include the always-fluctuating fuel surcharges, which could bump FedEx Ground and UPS Ground higher than USPS Priority Mail. The USPS service would also likely get the package from Houston to Miami within 3 days, making it ultra-competitive with the FedEx Express Saver and UPS 3-Day Select services.

Now let’s look at a similar package shipping a little closer.

55-pound package from HOU – AUS (Zone 2)

  • FedEx Express Saver: $99.03 + $24 (oversize) + $4.65 (residential) = $127.68 (not including fuel surcharges)
  • FedEx Home Delivery: $20.84 + $24 (oversize) + $4.00 (residential) = $48.84 (not including fuel surcharges)
  • UPS 3-Day Select: $58.65 + $24 (oversize) + $4.70 (residential) = $87.35 (not including fuel surcharges)
  • UPS Ground: $20.80 + $24 (oversize) + $4.10 (residential) = $48.90 (not including fuel surcharges)
  • USPS Priority Mail: $31.52 (no fees or surcharges)

Once you take into account the fees, what once looked like competitive rates for FedEx and UPS Ground services now is substantially higher.

(Note: these are the standard published rates for FedEx and UPS compared to USPS Commercial Rates. No negotiated rates are taken into consideration for these comparisons, as they vary on a case-by-case basis.)

All that being said, there is a way to circumnavigate some of these surcharges and find better rates across all three carriers by using their Flat Rate shipping options.

Flat Rate Shipping

Each of the carriers today offers its own version of flat rate shipping. Flat rate means you pay the same amount regardless of what the package weighs and how far it is traveling. While there are many similarities across the services, there are also unique elements to each as well.

  • USPS Flat Rate: Up to 70 pounds, must use one of the multiple box sizes offered free of charge from the carrier, Alaska and Hawaii included
  • FedEx One Rate: Up to 10 pounds for envelopes, 50 pounds for boxes, muse use one of the multiple box sizes offered free of charge from the carrier, Alaska and Hawaii included
  • UPS Simple Rate: Up to 30 pounds for standard boxes and 50 pounds for UPS-provided boxes, can use free Express boxes for 2nd Day Air, but otherwise no specific package requirements, Alaska and Hawaii have higher flat-rate options

USPS also offers Regional Rate flat shipping, but that service has a weight limit that is not applicable to packages of this size. If you want more information on that service, take a look at our breakdown here.

We’ll be doing a deep dive on all of these soon, along with a complete guide to flat rate shipping. In the meantime, let’s look at a couple of ways these could save you on your shipping of heavier items.

Let’s first look at the context of packages above 50 pounds, where UPS and FedEx charge oversize fees. Since USPS Priority Mail Flat Rate can accommodate up to 70 pounds, you may be able to get away with using the USPS Large Flat Rate box.

This option only costs you $18.30. Think about that for a second. Using this package type costs you less than the fee added on by FedEx and UPS for packages over 50 pounds!

For packages under 50 pounds, FedEx One Rate and UPS Simple Rate include costs like fuel surcharges and residential fees, making them much more competitive. FedEx still breaks the One Rate service into three distance categories for pricing tiers, unlike UPS and USPS services. This makes it still very important to compare rates based on package size and distance. For example:

For a medium-sized package shipped ground cross-country:

  • FedEx One Rate: $15.10
  • UPS Simple Rate: $23.50
  • USPS Large Flat Rate: $13.20
  • USPS Regional Rate Box B: $13.20

But when that changes to local or Zone 2:

  • FedEx One Rate: $12.35
  • UPS Simple Rate: $23.50
  • USPS Large Flat Rate: $13.20
  • USPS Regional Rate Box B: $8.07

As you can see, FedEx One Rate becomes a bit more competitive, yet is still beaten out by USPS Regional Rate, which dominates in shorter-distance shipping. You may find UPS Simple Rate works if your products don’t fit neatly in the carrier-provided packaging USPS and FedEx require. Making the right choice can be time-consuming, but the cost savings could turn out to be astronomical.

That’s why you need a shipping solution that helps you make the right decision, backed by shipping experts who know how to help you maintain a healthy bottom line by avoiding shipping surcharges whenever possible. Give ShippingEasy a try, absolutely free for 30 days, and start shipping smart without the added work. Click below and get set up in minutes!

The following two tabs change content below.

Rob Zaleski

Content Marketing Manager at ShippingEasy
I'm a digital content and social media nerd with a passion for telling stories, helping connect people, and finding joy in the details.