Each year, small parcel rates increase to keep up with rising operational costs, invest in infrastructure, and offset the cost of inflation. The new rates for FedEx’s and UPS’s domestic and international shipments will take effect on January 1, 2024. The average increase between FedEx and UPS is approximately 5.9% with some variation due to distance traveled, dimensional weight, and service used. USPS announced similar changes with rate increases between 5.4%-5.9% that will go into effect on January 21, 2024. This article breaks down the new small parcel rates and the impact on shippers moving forward.
The USPS Ground Advantage prices will increase by 5.4%, Priority Mail will increase by 5.7%, and Priority Mail Express will increase by 5.9%. These increases are very similar to FedEx and UPS, but USPS does not add surcharges for fuel, residential delivery, or regular Saturday delivery. USPS continues to offer some of the most affordable shipping prices due to their Delivering for America plan. This 10-year plan was created to achieve financial stability and improve services while staying affordable for consumers. After only two years into the plan, USPS has reduced projected losses by $90 billion while remaining competitive with market prices.
FedEx’s 5.9% increase is an average across all its services. The largest increase is with FedEx’s Priority Overnight service receiving a 7.88% increase. These rate changes do not factor in additional surcharges or their increases. Additional Handling and Oversize surcharges for U.S. Express Package Services and U.S. Ground Services will increase by approximately 18% depending on shipping zone. However, the majority of the FedEx surcharges don’t see such extreme increases.
Keeping in step with FedEx, UPS will also be increasing its rates on small parcel products by an average of 5.9%. It is important to note that this is a reduction to the rate increases in 2023 which averaged at 6.9%. The new rates will take effect on December 26th, 2023. Similar to FedEx, UPS rates do not include the increase in surcharges and value-added services.
The Future of Small Parcel
The biggest contributing factors to these small parcel rate increases are speed, weight, and distance. The market for long-distance deliveries is much less competitive than short-distance deliveries. This has caused the cost of these services to increase more significantly. Despite the rate increases each year, retail sales from ecommerce continue to grow. As demand grows, it is important for shippers to mitigate increased costs as much as possible by negotiating rate terms, optimizing packages, and taking advantage of bulk shipment discounts.
The supply chain industry continues to face challenges such as packaging and labor shortages. The increased rate of small parcel products and surcharges are an attempt to overcome these challenges and meet growing demand. To mitigate these costs passed down to consumers, it is important to work with a 3PL partner that can meet customer demand and keep rates at a low.