Will 2019 be the Year We Say Goodbye to Free Shipping?

January 2, 2019


The 2018 holiday season is over and by all accounts it was a successful one. According to MasterCard SpendingPulse, total holiday retail sales from November 1 to December 24 were up 5.1% and online spending up 19.1% from a year earlier.

Retail winners for the holiday period appear to be Amazon, Target and Walmart. According to a press release from Amazon, they shipped more than a billion items in the U.S. during the holiday season via Prime, and that tens of millions signed up for either a Prime subscription or a Prime trial.

Meanwhile, Adobe Analytics reported that buy online pick up in-store (BOPIS) is up 47% year-over-year, making it the biggest year of BOPIS on record.

Target and Walmart took advantage of the BOPIS concept hoping customers would buy more once inside stores to retrieve online orders. In addition, the concept could drive a potential savings on delivery expenses for not only Target and Walmart but all retailers that take advantage of BOPIS.

Average 2019 rate increases have already gone into effect for UPS with FedEx rate increases in effect on January 7 and the USPS 2019 rate hikes effective January 27.  Over the holiday season, CEO and Founder of Spend Management Experts, John Haber, discussed the rate increases with journalists. Of particular concern for retailers, is using free shipping as a tool to compete with other retailers and specifically with Amazon.

“It’s a huge cost increase and it happens every year, so over the long term it’s just not sustainable to offer free shipping to everyone,” Haber told the Atlanta Journal Constitution. “Right now these companies are just subsidizing it and I just don’t see how it can continue over a long time period.”

The Motley Fool also recently addressed the topic of free shipping. UPS’ SurePost and FedEx’s SmartPost are services provided in collaboration with the USPS under which the USPS provides the last mile delivery service. These service offerings along with USPS’ Parcel Select are often used by retailers that offer free shipping. While we are currently unsure of FedEx’s 2019 SmartPost rates, UPS’ SurePost 2019 rates are indeed higher for 2019. For UPS SurePost packages over one pound, rates are rising by 9%; for those under a pound, they’re going up 9.34%. Surcharges to certain rural or difficult-to-access locations will see rates rise by 32%. Rates for FedEx’s similar SmartPost arrangement are also going up. The USPS also raised its rates this past October, with its Parcel Select package rates rising between 9% and 12%.

It is a big problem for retailers and according to The Motley Fool, “Spend Management Experts says that SurePost, SmartPost, and Parcel Select are the options retailers most often use to offer free shipping in a bid to maintain parity with Amazon.com. That causes the retailers to operate at razor-thin margins, and the rate hikes could make free shipping a money-losing option for them.”

We work with a number of retailers to determine transportation cost savings as well as supply chain options that allow retailers to compete effectively in an ongoing changing environment. Start 2019 out on the right foot by contacting us today to see how we can help you. In the meantime, for more information on the 2019 rate hikes, check out our recent guide.

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Will 2019 be the Year We Say Goodbye to Free Shipping?

January 2, 2019


The 2018 holiday season is over and by all accounts it was a successful one. According to MasterCard SpendingPulse, total holiday retail sales from November 1 to December 24 were up 5.1% and online spending up 19.1% from a year earlier. Retail winners for the holiday period appear to be Amazon, Target and Walmart. According to a press release from Amazon, they shipped more than a billion items in the U.S. during the holiday season via Prime, and that tens of millions signed up for either a Prime subscription or a Prime trial. Meanwhile, Adobe Analytics reported that buy online pick up in-store (BOPIS) is up 47% year-over-year, making it the biggest year of BOPIS on record. Target and Walmart took advantage of the BOPIS concept hoping customers would buy more once inside stores to retrieve online orders. In addition, the concept could drive a potential savings on delivery expenses for not only Target and Walmart but all retailers that take advantage of BOPIS. Average 2019 rate increases have already gone into effect for UPS with FedEx rate increases in effect on January 7 and the USPS 2019 rate hikes effective January 27.  Over the holiday season, CEO and Founder of Spend Management Experts, John Haber, discussed the rate increases with journalists. Of particular concern for retailers, is using free shipping as a tool to compete with other retailers and specifically with Amazon. “It’s a huge cost increase and it happens every year, so over the long term it’s just not sustainable to offer free shipping to everyone,” Haber told the Atlanta Journal Constitution. “Right now these companies are just subsidizing it and I just don’t see how it can continue over a long time period.” The Motley Fool also recently addressed the topic of free shipping. UPS’ SurePost and FedEx’s SmartPost are services provided in collaboration with the USPS under which the USPS provides the last mile delivery service. These service offerings along with USPS’ Parcel Select are often used by retailers that offer free shipping. While we are currently unsure of FedEx’s 2019 SmartPost rates, UPS’ SurePost 2019 rates are indeed higher for 2019. For UPS SurePost packages over one pound, rates are rising by 9%; for those under a pound, they’re going up 9.34%. Surcharges to certain rural or difficult-to-access locations will see rates rise by 32%. Rates for FedEx’s similar SmartPost arrangement are also going up. The USPS also raised its rates this past October, with its Parcel Select package rates rising between 9% and 12%. It is a big problem for retailers and according to The Motley Fool, “Spend Management Experts says that SurePost, SmartPost, and Parcel Select are the options retailers most often use to offer free shipping in a bid to maintain parity with Amazon.com. That causes the retailers to operate at razor-thin margins, and the rate hikes could make free shipping a money-losing option for them.” We work with a number of retailers to determine transportation cost savings as well as supply chain options that allow retailers to compete effectively in an ongoing changing environment. Start 2019 out on the right foot by contacting us today to see how we can help you. In the meantime, for more information on the 2019 rate hikes, check out our recent guide.

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