Not much of a shocker when UPS followed FedEx and announced an average 6.9% general rate increase (GRI) for 2023. Per the announcement, “This helps to support ongoing expansion and capability enhancements as we strive to maintain the high service levels you expect from UPS.”
So, crunching the numbers and comparing them against FedEx’s 2023 GRI, guess what? UPS virtually mirrored FedEx’s 2023 GRI, not only on the macro level but also at the service, zone, and weight levels as well.
Both companies manage their businesses through revenue management initiatives while battling rising inflation, higher costs, and declining volumes.
A Closer Look at the Increases
Those revenue management initiatives include one of the highest annual rate announcements and yes, keep in mind that 6.9% is just an average.
For example, Ground rates by zone and weight are all above the average 6.9% except for Zone 2-3 for packages weighing 21-50 pounds.
Speed will cost shippers more, with Priority Overnight and Standard Overnight rates jumping well above the average 6.9%. For Zone 2, 1 pound package, the rate for both services will increase 8.5% in 2023.
It’s the same story for 2-Day and 3-Day delivery services, with rate increases ranging from 7.3% to 11.9%.
COVID Surcharge By Any Other Name Is Not Going Away
Given falling parcel volumes and expected excess capacity through the peak season and afterward, FedEx and UPS are trying to squeeze every penny of margin out of every package. A bit short-sighted, do you agree?
Remember the COVID-19 surcharge UPS and FedEx implemented in 2020 to manage demand? The surcharge shifted to a “peak surcharge” (not to be confused with the holiday peak surcharge), and in 2023 it will change once again to a “demand surcharge.” This signals to shippers and the market that this surcharge is not going away and they will not be limited to peak season.
Some other changes for 2023 are the late payment fee will increase from 6% to 8% — just like FedEx.
Don’t Forget the Other Surcharges
Surcharges are increasing and becoming more complicated to understand. For example:
- The Residential surcharge is increasing from $4.85 this year to $5.25 in 2023.
- Address Correction will increase from $18.00 this year to $19.50 in 2023.
- Over-maximum packages will increase from $1,025 to $1,150 per package in 2023.
- The Remote Area surcharge will increase from $12.00 to $13.05 per package in 2023.
- Residential DAS and Residential Extended DAS will increase by 50 cents each in 2023.
- Commercial DAS and Commercial Extended DAS will increase by 30 and 40 cents, respectively.
Navigating Higher Costs Requires a Strong Partnership
It’s all about density. Retailers that ship to consumers’ front doors must utilize such options as:
- Buy online, pick up in-store (BOPIS)/curbside.
- Additional last-mile carriers, including the USPS.
- Third-party drop-off points that UPS and FedEx tout may be good cost-saving options.
More than ever, retailers facing higher shipping costs need Intelligent Audit, a partner that will help them think outside the box with innovative solutions to track and manage shipping spend. We can show you 15 actionable steps you can take to reduce the impact of higher costs.Contact Intelligent Audit today to get started.