September 20, 2023

How UPS and FedEx Rate Hikes Impact eCommerce Businesses

Explore the implications of UPS and FedEx's new rate hikes on the eCommerce world. Dive into the challenges and opportunities these changes bring, from reevaluating free shipping to leveraging tech solutions. This blog provides insights needed to help businesses adapt and thrive amid industry shifts.


For eCommerce businesses, shipping logistics is a critical component of the customer experience. Recent announcements from UPS and FedEx regarding their general rate increases have set the eCommerce community abuzz. While such hikes are routine in the shipping world, understanding their implications is essential for online store owners. Let's dive into the rate increases and their potential impact on eCommerce.

The Rate Increases: A Snapshot

Both UPS and FedEx have unveiled their annual rate hikes for the upcoming year. UPS has announced a 5.9% average rate increase for its Ground, Air, and International services, which will come into effect on December 26. This matches the rise announced by FedEx, albeit slightly lower than UPS's 6.9% hike from the previous year.

Impact on eCommerce Businesses

  1. Increased Shipping Costs: The most immediate and tangible impact on eCommerce businesses will be the increased cost of shipping products. Store owners will need to decide whether they'll absorb these costs, share them with customers, or implement a mix of both.
  2. Rethinking Free Shipping: Offering free shipping has always been a compelling marketing strategy. However, with these rate hikes, businesses may have to reassess the financial viability of such offers. Thresholds for free shipping might increase, or it might become a privilege for loyalty program members.
  3. Packaging Optimization: With surcharges on bulky and challenging-to-handle packages set to rise during the peak season, businesses will be motivated to optimize packaging. Smart packaging solutions that reduce shipping volume can help in counteracting some of the added costs.
  4. Updated Pricing Strategy: eCommerce store owners may need to revisit their product pricing, especially for items with low margins. The rate hikes could necessitate slight price adjustments to ensure profitability.
  5. Customer Communication: Transparency is crucial. If businesses decide to pass on some of the increased shipping costs to customers, they should communicate this clearly. Honest communication about why shipping costs might have risen can help in maintaining customer trust.

Navigating the Challenges

While the rate hikes can pose challenges, they also offer an opportunity for eCommerce businesses to audit their shipping strategies. Here are some steps to consider:

  • Explore Alternative Carriers: While UPS and FedEx are dominant players, several regional carriers might offer competitive rates. Exploring and negotiating with multiple carriers can lead to better deals.
  • Leverage Technology: Implementing shipping software and automation can help businesses find the best shipping rates and options for every order. Moreover, real-time tracking and monitoring of shipments can enhance customer satisfaction.
  • Offer Multiple Shipping Options: While some customers prioritize fast shipping, others may be willing to wait a bit longer for a lower rate. Offering multiple shipping options can cater to both segments.
  • Bulk Shipments and Warehousing: For businesses with high shipping volumes, considering warehousing solutions or consolidating shipments can reduce per-package shipping costs.


The world of eCommerce is no stranger to change. While UPS and FedEx's rate hikes are significant, they're just one of many challenges eCommerce entrepreneurs face. By understanding the implications of these increases and proactively adjusting strategies, businesses can continue to thrive and deliver exceptional value to their customers. Remember, it's not just about passing on costs; it's about optimizing and evolving to continue meeting customer expectations in an ever-changing landscape.