UPS, FedEx Raise Rates Again

Another year, another rate hike: Parcel carriers United Parcel Service and Federal Express are both raising rates on Jan. 3.

Rates for UPS Ground, UPS Air, UPS 3 Day Select, and U.S. international services will increase an average of 2.9%. UPS Hundredweight Service rates will increase 5.9%. Last year UPS commercial ground rates increased 1.9% while UPS Air and UPS Worldwide Express delivery rates went up an average of 2.9%.

Also in January, Atlanta-based UPS will set a 9.5% cap on the fuel surcharges applied to UPS Next Day Air, UPS 2nd Day Air, UPS 3 Day Select and international services. For November, the fuel surcharge was 11%.

Other pricing changes include a $0.25 increase in the surcharge for delivery to more-remote ZIP codes. The residential delivery surcharge will increase $0.10 for UPS Ground services and $0.35 for UPS Next Day Air, UPS 2nd Day Air, and UPS 3 Day Select.

The cost of a 2-lb. residential Ground package in Zone 2 will increase 4.8%, to $5.17. The cost for a 2-lb. commercial Ground package is increasing slightly less — 3.9%, to $3.67. Similarly, a 5-lb. residential Ground package will cost $5.56, an increase of 4.5%, or $0.24. The same package, delivered to a business rather than to a home, will cost $4.06, an increase of 3.6%, or $0.14.

Rival FedEx, meanwhile, is increasing its published package and freight rates an average of 4.6% for U.S. domestic and export services. Last year’s rate hike averaged 2.5%. Standard list rates for FedEx Ground and FedEx Home Delivery will increase an average of 2.9%. FedEx Ground will also introduce an indexed fuel surcharge for U.S. and international shipments of a to-be-determined percentage, says spokesperson Jess Bunn.

Delivery area surcharges for select remote zip codes will increase $0.25, to $2.00 a package for residential locations and $1.25 for commercial addresses. The surcharge for residential delivery of FedEx Express and FedEx Ground packages will also increase, from $1.75 to $2.00 a package. The per-package surcharge for FedEx Home Delivery shipments will increase from $1.40 to $1.50.

The good news: FedEx lowered its fuel surcharge for FedEx Express by 2%.

Shrugging it off

Since the parcel carriers typically raise their rates each year, few marketers were surprised by the increases. Nor do many seem to be planning to pass the rate hikes onto the customer in the form of higher shipping and handling charges.

“We’re already making a pretty good margin on shipping,” says Todd Melinn, chief operating officer for Ontario, CA-based apparel cataloger Active Mailorder. “But we’ll monitor our competition to stay competitive.”

Irvine, CA-based women’s apparel cataloger/retailer Draper’s & Damon’s, which uses UPS as its primary shipper, is not planning to raise S&H, says vice president of marketing Jim LeCourt. “But we are paying close attention to the competitive landscape and will reevaluate sometime in the first quarter of 2005.”

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