PARCEL DELIVERY: Ho-hum, another UPS rate hike

>From a public relations perspective, United Parcel Service got lucky this >year. Less than two weeks after announcing on Dec. 29 that in February it >would raise ground-delivery rates up to 3.1% for most zones, air carriers >Federal Express and Airborne also announced plans to raise rates 3% in >February.

Then, the U.S. Postal Service not only announced its huge rate increase proposal for catalogs (likely to be implemented next January), but it also said it wants to push the price of a 1-lb. Priority Mail package up nearly 8% (see story on cover).

So catalogers aren’t reacting to the UPS ground-delivery rate hike – the mode by which more than half of all catalog packages are shipped – with much alarm. “Doesn’t UPS do this every year?” asks Christopher Bradley, president of $20 million bedding cataloger Cuddledown, based in Portland, ME. “I don’t think we can expect rates from any of the carriers not to keep pace with inflation. So there’s nothing earth-shattering about this increase.”

In addition to the ground-delivery rate increase, UPS increased its air/express rates 3.5% and bumped up the rural surcharge from $1 to $1.50. But the surcharge, initiated last year, applies only to 2.5% of all UPS deliveries, according to the carrier.

This year marks the 13th consecutive year that UPS has raised its ground rates. “We’ve had enough experience to expect an annual increase, so we budget for it annually,” says Jim Feinson, president/chief operating officer of $40 million gardening products cataloger Gardener’s Supply Co. The Burlington, VT-based company is considering raising its shipping and handling charges “to achieve our financial goals,” Feinson says. “But we don’t know yet if we’ll have to raise them.”

In recent years, many catalogers have been using software programs that factor in package weights and destination to determine which carrier – UPS or the U.S. Postal Service – is the best choice. As a result, UPS’s market share in the catalog shipping market has been steadily declining. It also helps that the USPS has more aggessively marketed its Priority Mail service. According to the 2000 Catalog Age Benchmark Report on Operations, just 56% of catalogers surveyed use UPS as their primary carrier, while 41% use the USPS. In comparison, 72% of respondents to the 1995 Benchmark Report said they used UPS, compared to only 24% who used the Postal Service.