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The hikes will be higher for many e-retailers, an expert says.
United Parcel Service of America Inc., the shipping carrier most widely used by Top 1000 e-retailers, has announced an average rate hike of 4.9% for 2014, effective Dec. 30. That is the typical average rate hike for UPS, though costs for e-commerce operators could be higher.
Among its service improvements, UPS says it is offering early-morning deliveries through its Next Day Air service to more ZIP codes in all states except Hawaii. It didn’t note the actual increase in number of ZIP codes, but says it offers next-day shipments by 8 a.m. to the 48 contiguous states and by 9 a.m. to most cities in other parts of the United States, including Anchorage, AK. It also offers next-day deliveries by 10:30 a.m. to major cities in all 50 states and Puerto Rico, it says.
Most e-commerce shippers, however, will see higher average rate increases rates will go up more sharply for the small packages that many web retailers ship, says Ken Wood, president of LJM Consultants, a firm that advises retailers and other shippers on how to cut shipping costs.
“Like in past years, this year’s increase will affect lighter-weight shipments much more significantly than heavier-weight shipments,” he says. Wood notes that UPS and FedEx Corp. calculate their average rate increases by factoring every weight classification from one to 150 pounds, while also factoring in all shipping distances. For each shipper, the carriers divide up their shipping destinations into multiple zones to set rates based on distance as well as weight. Shipping from a shipper’s home zone to one zone over is considered shipping to Zone 2; shipping two zones over is shipping to Zone 3, and so on. The higher the combined weight and distance for each shipment, the higher the rate.
The 2014 UPS rate increases, however, are larger for small packages than for bigger packages, Wood says. As a result, many e-commerce operators that ship mostly small packages—say, 10 pounds or less—will see a larger average rate increase.
For example, he says, the cost to ship a three-pound package to zone seven will increase by 7.84%, to $9.22 from $8.55, while the cost to ship a 130-pound package to zone 5 will increase by only 2.61%, to $66.71 from $65.01. “Few online retailers ship 130-pound packages to zone 5,” he says.
FedEx, which is also a major carrier for Top 1000 e-retailers, recently announced an average air-shipment rate hike for 2014 of 3.9%, effective Jan. 6. It’s expected to soon announce an overall rate hike for 2014, which it usually announces after UPS’s rate increase.
UPS has 412 clients among the Top 1000 and is ranked No. 1 in the Internet Retailer Top Tech 2014 guide. FedEx has 320 clients in the Top 1000 and is ranked No. 2 in Top Tech 2014.