How to Survive the 2017 Postage Rate Increases

Postage rate increases happen every year, much to the displeasure of online retailers. Postage is a large part of the costs of doing business in the ecommerce world, so inflation of that cost is rarely welcomed. Of course, the costs are justified: fuel, salaries, and administrative overhead increase every year, as is the nature of those things. But what can you, an ecommerce retailer, due to survive the 2017 postage rate increases? Let’s take a look at the changes and what we can do about them:

 

Changes per carrier

As is customary for this time of year, all three major US carriers have announced rate increases. These changes usually take effect in January or February, with some occurring as soon as December of the previous year. Comparing the changes for each carrier is important since it may affect which carrier’s services you’ll choose for a certain shipment type.

USPS

The United States Postal Service’s upcoming rate changes were announced by the Postal Regulatory Commission back in October (PDF link). Most postage rate increases will be effective as of January 22nd. Here are the highlights from the PRC plan:

• Priority Mail and Priority Mail Express rates are increasing at an average of 3.66%.
• First Class Package rates are increasing an average of 4% due to changes in weight bands.
• Parcel Select Ground is going up an average of 2.7%.
• Global Express Guaranteed will be an average of 5% more expensive.
• Commercial Plus discounts are decreasing an average of 4.5% across Priority and express services. CPP will now reflect an average 16.8% discount from retail prices.

Note: the PRC announced plans in 2015 to eliminate Commercial Plus Pricing completely by 2017. While that hasn’t happened yet, they haven’t said anything about delaying or canceling their plans. We may still see that happen before December.

FedEx

Federal Express began filling us in on their 2017 plans in September and continued to update their rate guide over the months leading up to the new year. Detailing every change would be quite the essay, since FedEx has over 50 different surcharges for domestic and international services. To save everyone time, here’s a quick overview of what’s happening this year:

• Business and express rates are increasing at an average of 4%.
• Dimensional weight calculations are being revised, and will now divide dimensions by 139 instead of 166. This will naturally cause calculated figure to be higher than before, leading to higher rates.
• The residential surcharge is increasing by 5.1%, while the surcharge for using the Home Delivery service is up 6.2%.
• FedEx Express’s fuel surcharge will now be revised weekly instead of monthly.
• The various surcharges imposed across service levels are increasing on an average of 10%.

Most rate and surcharge changes are already effective as of January 2nd. The only listed exception at this time is the new fuel surcharge system, which goes into effect February 6th.

UPS

Last but certainly not least in our rate hike roundup is the United Parcel Service. UPS competes directly with FedEx, so changes to their postage policies will feel very similar. These postage rate increases are already effective as of December 26th, 2016, with the exception of the new fuel surcharge system. Here’s a quick overview of what’s happened for 2017:

• Business and express rates were increased at an average of 4%.
• The surcharge for residential deliveries was increased by 4.6%.
• Dimensional weight calculations have been revised, and will now divide dimensions by 139 instead of 166. This is identical to the change that FedEx applied in January, and will also lead to higher rates.
• The Additional Handling Surcharge increased 3% and now applies to packages over 48 inches in length, instead of 60 inches, for Air and International shipments.
• Ground, air and international fuel surcharges will now be revised weekly instead of monthly, just like FedEx Express’s surcharge. It will also take effect starting February 6th.

What to do?

Now that you know what postage rate increases are occurring and when, but what is there to be done about them? Fortunately, ecommerce retailers do have options to minimize the impact that these cost hikes have on their bottom line. These tips are very quick to implement, and can reduce your costs even more than is needed to offset this year’s postage rate increases:

• Diversify your carriers. Far too many retailers only ship using one or two shipping providers. Not only should you be comparing rates between the big three (USPS, FedEx, and UPS), but you should also consider other providers like DHL Express and regional providers like OnTrac and LaserShip.
• Compare rates for every shipment. It may be a general rule that USPS is cheaper for small and light packages while UPS is the best choice for heavy ground shipments. However, the rates are constantly changing across the board, so it would be reckless to assume without double-checking. Use a multi-carrier shipping solution like SKULabs to compare rates before you buy your postage – you might be surprised by which service comes out on top!
• Keep your other fulfillment costs low. Review your costs per order fulfilled. It’s not just the product and postage – factor in your employee’s paid time, how many hands touch the order, how long it takes to process, and other material costs like packing material. You may be able to improve your margins by optimizing your fulfillment process or packaging per shipment. Even going paperless will shave off some cost!