It seems like every year there are changes and updates made to shipping costs and this year is certainly no exception. Between the labor shortage, fuel costs and an unexpected backup-at-the-ports, carriers are definitely looking at an increase in costs which they will no doubt be passing along to you, the shipper. If you ship in the United States using UPS, DHL, or USPS you can count on an increase in shipping rates. In this blog we’re going to review some of the changes made to shipping and what you can do about it in 2022.
Effective Date: January 9th, 2022
-Retail rates for First Class Package Service will increase by $0.50 for packages weighing 1–4 ounces, $0.30 for packages weighing 5–12 ounces, and $0.80–$1.70 for packages over 12 oz.
-Retail rates for Priority Mail Express will increase by 3.1% overall
Effective Date: December 26th, 2021
Not waiting until the new year, UPS implemented their new charges the day after Christmas. UPS published rates will increase by an average of 5.9%.
Effective Date: January 9th, 2022
-The ZIP codes for which area surcharges apply will change. These include Delivery Area Surcharge, Extended Area Surcharge, and Remote Area Surcharge. Click here to see the full list of applicable ZIP codes.
Effective Jan 1, 2022 DHL Express retail rates will increase by an average of 5.9% for DHL Express Worldwide shipping service.
Effective January 10, 2022, Canada Post rates will increase by an average of 3.5% domestically and 2.8% to the US and internationally.
How to optimize your shipping strategy
The options available to you are largely based on your current shipping strategy; fee, flat rate or calculated shipping. Depending on which shipping option(s) your brand offers you will need to adjust your strategy accordingly.
If you offer Free Shipping here are some options available to you:
An Increase in product prices – If you’re still dead-set on maintaining your ‘free shipping’ options then an increase in product prices may be where you make up the loss incurred from the increased shipping costs. If you increase your products’ prices by the same percentage as these shipping increases you will maintain your magins. Although, your repeat and loyal customers may notice an increase in price, which could lead to an impact in their purchase frequency and shopping habits. This may be something worth A/B testing.
You could just do nothing – If you choose this route then you’ll need to absorb the increased cost of shipping yourself. Confirm your margins and your profitability before taking this route.
Consider a switch to ‘Free Shipping Minimums” – There is a compromise to be found between increasing your product prices and doing nothing. And that compromise is to add a free shipping minimum. This tactic has been shown to increase the average order value, which will help to offset the increased cost in shipping. This strategy will also pass along the cost of shipping directly to your customers if their order fails to reach the minimum threshold.
If you offer Flat Rate Shipping here are some options available to you:
You could just do nothing – Same as with Free Shipping, if you choose to do nothing then you’ll have to eat the cost yourself. Confirm this plan’s sustainability and long term functionality.
Adjust or introduce Order Value Ranges – There’s no rule that says your flat rates need to be the same for every order. Consider offering a higher flat rate on smaller orders and lower flat rates as orders and cart sizes increase. This will help off-set the increase in shipping costs.
Increase product prices – If you increase your products’ prices by the same percentage as these shipping increases you will maintain your magins. Although, your repeat and loyal customers may notice an increase in price, which could lead to an impact in their purchase frequency.
Increase Flat Rate Shipping – This increase may lead to similar results as an increase in product prices and it may impact your abandoned cart rates as customers will see this charge later on in the sales process. Consider altering the messaging and frequency of your Cart Abandonment emails if this is the path you choose.
Calculated Shipping Rate
If you offer Calculated Shipping here are some options available to you:
You could just do nothing – If you use a calculated rates provider or app and you choose to do nothing then these new charges will be automatically updated as soon as they are implemented.
Decrease Product Price – Since your shipping rates are going to be automatically updated via your carrier extensions and applications a decrease in product price is an option. Once again, ensure that your margins are sustainable and pricing remains consistent and strategically in-line with the rest of your product line and your competitors.
Adjust for 2022 and beyond
While your current 2022 budget may need to be adjusted to account for some of these new charges, this might be a blessing in disguise. You could use this opportunity to rethink your entire shipping strategy from the ground up. If none of your calculations hit on your target margin, pricing strategy or shipping rate then it is time to go back to the drawing board. The team here at InteractOne is experienced and knowledgeable and ready to help craft a shipping strategy that works for you and your plans.