Parcel Costs were already rising in 2020. Now what?

A Plane Landing
April 29th, 2020 FULFILLMENT

At the beginning of 2020, FedEx and UPS raised their rates by an average 4.9% across all service types, which isn’t an unusually large hike across the board. Since the pandemic began disrupting the supply chain however, the carriers have added additional surcharges for shipments originating in China, and suspended their respective service guarantees. While normal rate hikes cause a bit of a stir among the companies that rely on tight margins, the added surcharges mean shippers have to tighten their belts even further.

The postal service didn’t raise rates quite as much as FedEx and UPS at the beginning of the year, but the pandemic and new political challenges could change that. Hypothetically, if the USPS heeds the demands of the Trump administration and raises prices four times over, that will have a profound impact on the other parcel carriers too, who rely on the USPS for last mile delivery. While FedEx started moving away from their SmartPost and SurePost offerings in early 2019, they still rely on USPS. UPS has taken the opposite approach, leaning into their last-mile reliance on the post office even more.

There’s no question COVID-19 is having a marked effect on the global supply chain, even just considering the reduction in air cargo capacity, so the rate increases and guarantee suspensions are understandable. That doesn’t make it any easier on companies trying to bring much needed goods in from their supply partners in China, with an additional $0.45 - $0.90 per pound that has to be built into their margins.

Consumers might start to see free shipping go away for a while. We may start to see more retailers experimenting with membership fees (a la Amazon Prime), or various surcharges, to obscure the fact that free shipping is no longer tenable.

In the quest to increase margins by lowering shipping costs, the lowest hanging fruit is optimizing how boxes are packed. Sign up to try out Paccurate, or get in touch and we’ll show you how much you could save.

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