Starting in January 2014, FedEx and UPS rates increased approximately 5% over last year. But that’s not the whole story: surcharges are expected to jump an additional 7.6%. The USPS also raised rates by approximately 1% across the board.
Shipping fees are one of the largest cost centers for online retailers. For businesses that choose to offer free shipping or reduced-rate shipping, it is a cost that is absorbed by the brand. When delivery carriers raise rates, etailers feel it on the bottom line. Mid-market and small brands are particularly vulnerable because they do not have the economies of scale to negotiate shipping volume discounts with carriers.
Brands can implement innovative pricing strategies to guide customers into making better buying decisions to lower costs.
Offer multiple pricing tiers so customers can choose lower rates if the purchase is not time sensitive.
Offer tiered price discounts to encourage customers to order more efficiently. “Free upgrade to 2-day shipping for orders over $75” results in an incremental cost for fulfillment and shipping for each additional item in the box, but yields high value for the customer and additional revenue for the brand.
Move “guaranteed delivery” dates back so that customers do not wait until the last minute to order gifts. Not only is it more expensive for the customer, it also puts pressure on your inventory and fulfillment teams which can result in overtime and missed delivery deadlines.
To combat rate changes, you can also partner with an outsourced shipping provider. Benefits can include: access to multiple warehouses to reduce delivery time and distance, rate shopping for lowest rates across carriers, and lower costs for shipping labels and materials.
By tapping into a larger network, brands can take advantage of lower rates negotiated for the entire network and shave 15 – 30% savings off retail rates.
Shipping rates will continue to rise due to demand, volatile fuel prices, and carriers seeking to boost their own bottom lines. Brands must adopt proactive pricing and partner strategies to offset or eliminate the 2014 rate hikes – or risk passing those costs on to customers.