Budgeting for ‘average’ parcel rate increases is like hoping termites will go away on their own – they’re going to eat away at your bottom line eventually if you don’t protect yourself.
eCommerce shippers like you should arm your supply chain with the right data to get ahead of carrier surcharges and rate hikes – by understanding which rates have been modified and are most applicable to your shipping business.
Once you identify which parcel charges are relevant to your team, it’s time to strategize. Here’s a recap of the most significant parcel rate increases coming for shippers:
Carrier Rate Increases for 2022
Beginning Jan. 3rd, 2022, FedEx launched an average general rate increase of 5.9% for all its services. An increase hike not seen in a decade – and yet, the actual impact to shippers is significantly higher.
For example, residential services for FedEx Ground rose 9.01%! FedEx Ground Economy at a minimum of 5% up to 10.8% – so is 5.9% relevant to your shipping business, or do you need to rethink your 2022 budget?
But that’s not the biggest shift from carriers this year.
FedEx’s game changing shift will come in the form of zone based pricing
Effective Jan. 24, FedEx will start calculating additional handling and oversize surcharges based on your shipping zone. If the zone is three or higher, the end price will pack a strong punch. In fact, the rate climbs by at least 10% every two zones, up to zone seven.
Here’s a real-life example: Your 20” x 20” x 25” box will see a 34%+ increase on one additional handling surcharge – significantly increasing your current parcel spend.
- Shipping oversized packages? For FedEx Express and Ground, 2022 rates range between $110 to $145 per package depending on the zone. That’s up to a 38.10% increase from the flat rate of $105 in 2021. And if you only budgeted for 5.9% you’ll be in for a shock once your invoice hits.
- Beware! There is no longer a flat fee for Oversized Home Delivery charges. Not only will they be zone based too, the 2021 standard price of $130 will now increase from 3.85% to 30.77% – shippers like you could be paying up to $170.00 per package. (Did you just clutch your purse?)
- Another important change shippers should be aware of is that effective Jan. 17, 2022, FedEx will be discharging a Delivery and Returns Surcharge on packages delivered or returned through the FedEx Ground Economy service.
The announced 2022 general rate increase for UPS was also 5.9% – effective Dec. 26th, 2021. (And if you’ve been following along you already know not to take that at face value.)
Just take a look at some of the surcharge changes:
- 2021 UPS Ground (Commercial) Rate: $3.10
- 2022 UPS Ground (Commercial) Rate: $3.40
- Increase: 9.68%
- 2021 UPS Ground (Residential) Rate: $4.30
- 2022 UPS Ground (Residential) Rate: $4.80
- Increase: 11.62%
Additional Handling and Large Packages Were Hit Heavy
UPS once again rolled out their domestic charges to be zone-based for additional handling and large packages – meaning shippers need to be on their toes.
If you’re shipping large packages (when its length plus girth [(2 x width) + (2 x height)] combined exceeds 130 inches or its length exceeds 96 inches) – expect anywhere between an 8%-13.79% increase for all residential. And up to 16% if you have commercial deliveries.
Additional handling for length and width, weight, and packaging will now be 5.20%-9.37% higher in service price. See what we meant when we said to disregard that 5.9% average?
Lightweight Shippers – Surcharge Changes
Small packages will also feel some pressure. UPS is raising their minimum charge for 2022 to $9.36 for 2022. Over a 9% increase. And if you have packages under 5lbs, expect a rise in fees by up to 8% to ship those out.
Delivery Area Surcharge (DAS)
- One of the biggest shifts UPS made in 2022 was the DAS charges – based on zipcode. UPS defines it as: “A surcharge to each UPS Hundredweight Service shipment delivered to certain ZIP Codes within the 48 contiguous states”
- Shippers will see an increase of 9.23% to 11.62% For UPS Ground Commercial, the 2022 rate is $3.40. And $4.80 for UPS Ground Residential.
The United States Postal Service was approved for a shipping rate increase effective Jan. 9th, 2022 – and many popular services were impacted. This is a common carrier for eCommerce shippers, and there are some noticeable changes:
- Priority Mail and Priority Mail Express increased by 3.1%
- Priority Mail International by 3.7%
- First Class Package increased 8.8%
- First Class Package International Service by 4.2%
USPS is deploying more charges in April 2022
Packages with length between 22 and 30 inches will have a $4.00 surcharge. Packages longer than 30 inches will be hit with a $15.00 surcharge.
And there’s a few more changes to package size:
- Small Flat-Rate Box will increase from $8.45 to $9.45
- Medium Flat-Rate Box will increase from $15.50 to $16.10
- Large Flat-Rate Box will increase from $21.90 to $21.50
Staying in line with other major carriers, DHL has increased their rates by 5.9%. You can find their service guide here – but let’s take a peek at some of the changes that went into effect on January 1st, 2022.
- Remote Area Pickup and Delivery will increase by 7% from $42.00 per shipment (or $.42 per lb – whichever is greater) to $45.00 per shipment or $0.45 per lb.
- Residential address is also increasing by over 7% from $4.95 per shipment to $5.30.
- Address correction and change of billing will increase from $18.00 per shipment to $19.50 per shipment – over an 8% rate increase.
While not yet a parcel carrier, Amazon is feeling the pressure as more shippers look toward their fulfillment services. In response, Amazon is hiking up rates starting Jan. 18, 2022 and you can find a full breakdown of core FBA fulfillment fee changes here.
What Can You Do About These 2022 Rate Changes?
Your first step in combating these parcel carrier rate changes is to have not just visibility into your shipping data – but a full view of every aspect of your shipping profile. Your data holds the answers to:
The options for optimization are endless for your supply chain when you can see the big picture of your operations.
Parcel carriers didn’t just raise the prices on your shipping costs out of necessity, they’re reshaping how they want to work with customers, and more importantly, who they want to work with. The results? Online shopping is about to get a lot more expensive, for everyone.
New Year – New ‘Next’ Normal
What we’re trying to say is don’t get comfortable with these surcharges and the carrier announced ‘average.’ Understand them, roll with them, and stay alert. The market is changing – and carriers are strained. Which inevitably trickles costs down to shippers like you.
If you need help making more sense out of carrier general rate increases for 2022, check out our comprehensive shipping cheat sheet.