Shipping & Fulfillment

3 Ways to Offset Shipping Rate Increases

The United States Postal Service will again temporarily raise shipping rates during the peak Christmas shopping season. This should be no surprise. And it’s a reminder to look beyond 2022 and think about peak season shipping strategies for the long term.

Announced on August 10, 2022, this holiday rate increase is similar to peak-season price boosts in recent years. The increases will begin on October 2, 2022, and conclude on January 23, 2023.

The rate for retail Priority Mail boxes will rise 30 cents per package for shipments weighing 10 pounds or less and traveling up to four zones. Heavier retail Priority Mail packages could increase as much as $6.45 per box when that item travels five zones or further. Flat rate prices will be 95 cents higher during the temporary rate adjustment period.

  • $0.95 increase for Flat Rate Boxes and Envelopes.
  • $0.30 increase for Zones 1-4, 0-10 lbs.
  • $1.00 increase for Zones 5-9, 0-10 lbs.
  • $0.95 increase for Zones 1-4, 11-25 lbs.
  • $3.20 increase for Zones 5-9, 11-25 lbs.
  • $3.25 increase for Zones 1-4, 26-70 lbs.
  • $6.45 increase for Zones 5-9, 26-70 lbs.

USPS zones are based on the shipping origin. This example map displays zones from Traverse City, Michigan. Source: Endicia.

Christmas Shipping Strategy

The USPS rate increase is just one part of the holiday shipping picture. Retailers should consider other factors, such as internal fulfillment capacity, parcel delivery surcharges from UPS and FedEx, and employee overtime costs.

While many merchants have become adept at dealing with these annual challenges, the reality is that ecommerce shipping is changing (has changed). It’s no longer a cost center but a key part of the customer experience. This means ensuring that customers clearly understand your shipping policies and can track their orders easily.

It also means offering multiple shipping options and allowing customers to choose — from free shipping to expedited to in-store pickup. Or, a personal favorite, the ability to consolidate items that might otherwise ship from separate warehouses.

Amazon is using this last approach. On many Prime orders, a shopper can choose to receive an order as quickly as possible — meaning multiple packages from different warehouses with items arriving on consecutive days — or wait a little longer for all of the items to come in one box, presumably from the warehouse that had all of the items but was further away.

Amazon is pitching the idea to help sustain the environment since less packaging and fuel are used. But it is also a way to reduce shipping costs and increase the profit per order. The customer feels good about making an environmentally friendly choice, and the merchant profits from it.

The bottom line is that retailers should start thinking about peak Christmas season shipping now and assemble a strategy for the long term.

3 Ways to Reduce Shipping Costs

With planning, an ecommerce business could offset temporary USPS rate increases.

  • Put inventory closer to your customers. The recent USPS rate increase is highest when the package travels to zone five. Specifically, an 8-pound box headed to zone four would be 30 cents pricier this holiday season, while an identical shipment to zone five is $1 more.

Ecommerce businesses can offset this cost by putting products no more than four zones away from most customers. This could be done by distributing inventory to multiple warehouses, focusing marketing efforts on areas near existing warehouses, or — for large ecommerce enterprises— using a zone skipping strategy, wherein packages are moved by bulk freight to a post office near their final destinations.

  • Reduce package weight and dimensions. A packaging supplier offers multiple box sizes. Some might be strong and lightweight for, say, $4 each, and others heavy and bulky for $3.50. Before you pick the less expensive box, determine how it would impact package weight and dimensions.

For USPS’s 2022 Christmas rate hikes, a box that weighs exactly 10 pounds and is headed to zone four will cost 30 cents more than usual. But a box that weighs 10 pounds and 1 ounce headed to the same address would cost 95 cents more.

So just 1 ounce of extra packaging could increase the shipping cost by 65 cents.

Review shipping materials at least a couple of times each year. Packing supplies that add unnecessary weight or bulk could cost you money.

  • Get cheaper rates. I’ve focused this article on the USPS, the carrier least likely to extend rate discounts. But this doesn’t mean your business cannot negotiate with other carriers, compare rates, and take advantage of marketplace or platform discounts.

Long-term Strategy

Start thinking about the peak Christmas season shipping now. But assemble a long-term strategy beyond the immediate period. There are many ways to lower ecommerce shipping costs, including putting inventory closer to customers, reducing package weight and dimensions, and getting cheaper rates from carriers. By doing these things, a retailer can offset the cost of these inevitable surcharges and rate increases.

Armando Roggio
Armando Roggio
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