UPS and FedEx love to advertise their low carrier charges, hoping to draw in business from e-commerce companies who are none the wiser about a range of additional surcharges and accessorial fees.
Your e-commerce business needs full transparency to minimize shipping expenses. That’s why we’ve compiled this list you need to know about:
5 Dirty Little Secrets:
- UPS: A 4.9% Overall Increase in Price for 2020
- Hiding Accessorial Fees
- Residential Delivery Surcharges
- The Cost of Handling Weight
- USPS – Cubic Pricing and Potential Savings
For example, research shows that 23,223 of the 41,702 ZIP Codes in the US are being impacted by Delivery Area Surcharges. It equates to over 55% of the country, while 25% of the US population is affected.
This can translate to thousands of dollars in extra fees, which is why you’ll need to pay attention to the small print and not the seductive prices offered by the likes of UPS and FedEx as they aim to get your business in the door.
Accessorial fees are a significant part of the business model for most carriers, so the United States Postal Service (USPS) is often the most economical option if you send packages frequently.
Here are five dirty secrets about accessorial fees and why USPS could solve your eCommerce shipping needs.
For eCommerce businesses, most packages will likely be sent to residential addresses, while B2B deliveries come with their own set of separate surcharges.
1. UPS: A 4.9% Overall Increase in Price for 2020
2020 has been a challenging year for businesses, but there’s been no respite if e-commerce is your model for making money.
UPS announced an average rate increase of 4.9%, effective in December 2019.
FedEx has also recently increased its fees and went a step further by “implementing a temporary surcharge on all FedEx and TNT international parcel and freight shipments beginning April 6” in response to the COVID-19 crisis.
It’s worth remembering that there will always be discrepancies depending on the circumstances of your business, so you could end up paying much more than you’re used to.
They may cite margins and higher costs as reasons for increased fees each year, but there are also numerous surcharges to consider first.
2. Hiding Accessorial Fees
UPS and FedEx make a point of making accessorial fees challenging to understand, and they keep them hidden away in the small print.
Eating up the costs is an accepted part of doing business, but you don’t necessarily have to pay for a service that tacks on more charges than your average budget airline.
Most importantly, you’ll need to work out any additional costs as soon as possible, and they add up more quickly than you might expect.
3. Residential Delivery Surcharges
Residential delivery surcharges are often the most egregious example of accessorial fees.
Let’s say you need to ship a small package to a residential address, as many e-commerce businesses do daily, to multiple homes. As well as the advertised price, a $4.40 ‘residential delivery surcharge’ will be tacked on by FedEx, eating into profit margins that sit at roughly 40% for the best-run companies.
For eCommerce businesses, most packages will likely be sent to residential addresses, while B2B deliveries come with their own set of separate surcharges.
The USPS Flat Rate is an excellent option if you’d prefer to pay a simple set fee with no extra surcharges. Prices start at $7.50, and they have discounted rates for business customers.
4. The Cost of Handling Weight
Everything from package weight to fuel consumption is becoming more expensive for e-commerce businesses that rely on shipping services to get their products to customers.
The UPS Additional Handling – Weight charge is now applied from 50lb rather than 70lb and comes in at $24 per instance. It’ll start to add up quickly if you’re sending heavier items regularly and can eat into your profit margins if you’re not careful.
UPS has also introduced four additional new surcharges for 2020;
● C.O.D
● Signature Required
● Additional Handling
● Peak Additional Handling
Alternatively, the USPS Flat Rate will allow you to ship packages up to 70lb to any state at the same price, which is ideal for smaller, heavier items.
5. USPS – Cubic Pricing and Potential Savings
USPS Cubic Pricing is possibly the best kept secret of all if you’re hoping to lower shipping costs.
High-volume customers can access discounted rates, while it works by calculating the length, width, and height of your package. They offer five tiers depending on the overall cubic size, and it often works out to be cheaper than FedEx, UPS, or even USPS Priority Mail.
For example, a Tier 3 (8” x 6” x 8”) package shipped to Zone 6 would incur a delivery charge of $22.47 if you’re using Priority Mail Commercial Base rates. It drops to just $10.98 with USPS Cubic Pricing, working out as a saving of 51%.
In an ideal world, competition between UPS and FedEx would lead to lower prices and improved services. Instead, they have a stranglehold on much of the market, and they’re not necessarily the most economical choice when you factor in the multiple accessorial fees that are inevitably attached.
As mentioned, you won’t have to deal with residential delivery fees with the USPS, and their flat rates are easy to understand. A competitive shipping program should utilize the advantages of each carrier’s strengths and minimize their weaknesses. You should not be using a single carrier, even if you’re only shipping one product.
Ensure your software can handle multiple carriers to maximize your savings on every shipment you send out the door. The best part is you don’t have to do this alone. With a partner like Essential Hub, you get a competitive shipping program tailored to your needs. Find out how today!
