Let me say it plainly: Ground shipping is no longer cheap. Not in 2025. The economy-tier services ecommerce brands relied on to keep costs down are rising faster than any other mode. And the kicker? You probably didn’t notice because they rose quietly. Just a few cents here, a new surcharge there. But it’s compounding…fast.

According to the latest TD Cowen/AFS Freight Index, economy ground parcel rates rose nearly 7.5% year-over-year in Q2 2025. That’s faster than air. Faster than LTL. And definitely faster than most brands can react.

Also, ground parcel rates hit 32% above the January 2018 baseline in Q2, an all-time high, even though average diesel prices fell. That tells you rate increases aren’t tied to fuel, they’re strategic margin plays.

Why is ground shipping getting more expensive?

FedEx and UPS aren’t running charities. In 2025, both carriers quietly inflated their accessorial fees, extended delivery-area surcharges (DAS), and repriced how they interpret “residential” addresses.

UPS, for example, now applies a Remote Area Surcharge to 15% more ZIP codes than in 2024. Combine that with the standard rate increases, and you’re looking at a 10–15% total effective increase for some DTC brands shipping to suburbs.

What’s driving it?

• FedEx’s network restructuring under its “Network 2.0” initiative
• UPS’s post-Teamsters contract cost recovery
• Fewer economy packages post-COVID peak = lower density = higher per-package costs
• Carriers are padding revenue per stop while demand softens

The Hidden Cost Curve: What the Data Tells Us

The logistics world has been quietly boiling, and most ecommerce operators don’t even realize how cooked they are until the Q4 freight invoices hit like a hammer. That’s why I wanted to step back and show what’s really going on with ground shipping costs, both over time and across weight and zone variables.

When you zoom out, the real story isn’t just one rate hike or another DAS update; it’s the slow, compounding weight of cost acceleration over time. That’s why we analyzed both the long-term parcel index trend and current 2025 rate tables from UPS and FedEx to show what’s happening beneath the surface.

Ground Parcel Index Trend (2018–2025): The Slow Burn That’s Now a Blaze

First, we charted the TD Cowen/AFS Ground Parcel Index from 2018 to 2025. This isn’t just any index; it’s an aggregated pulse check on ground parcel shipping costs across major carriers (UPS, FedEx, and USPS), normalized for inflation, fuel surcharges, and accessorial fees.

If you look at the trendline, you’ll see a gentle incline in the early years. Then 2020 hits. COVID disruptions + ecommerce boom = a sharp climb in rates. What’s surprising, though, is what happened next. You might expect some post-pandemic relief. Nope. The index kept climbing. By Q2 2025, it’s at its highest level ever, driven not by pandemic chaos, but by calculated carrier pricing strategies, DIM weight enforcement, and fewer carrier incentives for SMBs.

Takeaway: If you’re budgeting based on 2022 assumptions, you’re underwater. Index data shows that ground rates have structurally shifted up, and the new normal is…not normal at all. There’s a new silent tax on every ecommerce order, especially for brands that haven’t updated their logistics strategies in years.

Chart 1: FedEx and UPS Ground Parcel Index (2018–2025).

Billed Weight vs. Cost-Per-Package (Multi-Zone): The Hidden Geometry of Shipping Pain

The second chart shows the cost curve for shipping a package via ground, depending on billed weight and destination zone. This was derived by synthesizing rate tables from the official 2025 UPS and FedEx rate guides you can download right now. We simulated realistic pricing across Zones 2 through 8, for packages up to 50 lbs.

What becomes clear fast is this:

• Zone distance has a nonlinear impact. The same 10 lb box costs nearly 30–40% more to ship to Zone 8 than Zone 2.
• Weight-based costs aren’t flat. Each extra pound adds more than just weight; it multiplies cost, especially past the 10–15 lb range where rate brackets steepen.
• You’re probably getting crushed on midweight, long-zone shipments. That 18 lb box going to Zone 7 is silently eroding your margin every time you offer free shipping.

Takeaway: The average ecommerce merchant is overpaying because they’re not engineering for zone or weight efficiency. They’re just printing labels and hoping for the best. Big mistake.

Chart 2: Billed Weight vs. Cost-Per-Package by Zone (FedEx & UPS, 2025).

Key insights include:

1. Zone escalation is brutal. The same 3 lb package can cost 2× as much going to Zone 8 versus Zone 2. A single-warehouse model is bleeding you dry on long-haul orders.
2. Billed weight ≠ actual weight. Dimensional weight pricing inflates cost, especially when packaging isn’t optimized. A 2 lb item in a 12 × 12 × 10 box can be billed at 8+ lbs.
3. Carrier policies diverge fast. USPS Ground Advantage offers strong pricing in Zones 2–5 for lightweight packages, while UPS’s negotiated discounts become more competitive at higher weights and volumes. FedEx Ground Economy still has a niche in deferred delivery, but fewer merchants rely on it due to limitations on delivery speed and flexibility (e.g., cannot deliver to PO Boxes).
4. Flat rate isn’t always flat. Priority Mail Flat Rate boxes are convenient, but often more expensive than zone-based pricing for 2–5 lb packages going to Zones 2–4.

Takeaway: Don’t just look at average shipping cost. Build a dynamic model that accounts for zone distribution, dimensional weight risk, and carrier behavior. It sounds scarier than it really is: modern technology can help. For the rest of 2025 and into 2026, optimizing for billable weight and fulfillment geography isn’t a “nice-to-have.” It’s a survival strategy.

Practical Advice for Q3/Q4 2025 and Into 2026

So what’s the fix? Firstly, we’re seeing that brands are shifting lower-value, lightweight shipments to slower, economy service tiers, like FedEx Ground Economy or UPS Ground Saver, to soften cost spikes. But while slowing down your low-value shipments can help, it shouldn’t be the only lever you pull. You still have customer expectations to meet. Let’s dig into how you can keep up, fiercely and intelligently.

1. Shift Volume Strategically, Don’t Just Rant About Rates

The index shows that shippers are diverting lightweight parcels to slower service levels this quarter. That shift drove down cost per package but raised average billed weight, leading to surprising rate hikes in the index data.

Here’s what to test:

• Pilot deferred services for small items (under 2–3 lbs) and see if the slower ETA is worth the savings.
• Never just blanket shift—test geographically. Maybe shift East Coast to Ground Saver and keep West on Priority.

That data-backed nuance lets you stay lean without tanking delivery promises.

2. Audit Surcharges Like a Hunter, Because Carriers Are Hunting Yours

UPS raised its ground fuel surcharge by 15%, FedEx by 12%, even though diesel dropped by 8% YoY. That’s not cost pass-through, it’s revenue arbitrage.

And surcharges aren’t limited to fuel. UPS added fees for:

• Print services
• Payment processing
• Paper invoices
• Zone realignment errors

Every surprise fee is a profit leak if you don’t audit. Run monthly invoice audits using a service such as Refund Retriever or Cahoot’s Carrier Invoice Report to claw back charges and prevent reoccurrence. Benchmark your rates quarterly for visibility over time.

3. Optimize Packaging: Because Every Inch Costs

Don’t ignore the weight/zone multiplier. Carriers LOVE dimensional weight. As zones shift and surcharges rise, oversized packages are now a double penalty. Smart brands:

• Use polybags or bubble mailers for soft goods
• Right-size boxes using cartonization logic
• Use postage scale logs to track size variance

It’s: smaller box → less DIM weight → fewer zones crossed → lower shipping expenses across your program.

4. Leverage USPS When It Makes Sense

With FedEx/UPS squeezing margins, USPS Ground Advantage and Media Mail suddenly look powerful again. They’re slower, yes, but for low-cost items, the trade-off can be entirely worth it.

USPS even rolled out Priority Next-Day service in over 60 markets (and growing), blurring the line between economy and faster options. That’s something to pinch-test.

Note: Priority Mail Next-Day is a separate, contract-only service for businesses with negotiated service agreements that offers next-day delivery to locations within 150 miles of participating USPS locations. Minimum volumes may apply.

5. Customer Communication = Margin Protection

Don’t hide slower service under a free shipping flag. Instead:

• During checkout, call out “Delivered in 4–7 business days via Economy Ground” with real-time tracking links.
• Offer delivery upgrades at purchase for fast-moving or high-value SKUs.
• Use delivery expectations as a conversion tool, not a surprise to the customer.

Clear language prevents complaints, WISMO cases, and refund requests that eat margins.

6. Regional Carriers & Hybrid Last-Mile Models

Major carriers aren’t always cheaper. Some brands are partnering with regional carriers or using local couriers in high-density zones. That often cuts costs without sacrificing delivery time.

Examples I’ve seen work:

• A local carrier picks up in NYC or LA, then delivers packages in bulk to FedEx/UPS/USPS for the final mile.
• A hybrid mix of FedEx/UPS + USPS for rural zones.

This strategy especially helps when mode-shifting lightweight volume away from big carriers. When you’re shipping high volume and low-margin items — think apparel, small electronics, beauty, or anything lightweight — every few cents saved per shipment adds up. These hybrid models help:

• Lower cost-per-package
• Improve delivery coverage in tricky zones
• Avoid rate hikes from major carriers

7. Explore Hybrid Fulfillment

If your 3PL is stuck in one location, you’re likely hitting long zones by default. Spreading inventory closer to customers can drastically reduce the average shipping zone and cost.

8. Re-evaluate your free shipping threshold

If your AOV is $42 and your average shipping cost is $14, you’re giving away margin with every “free” shipment.

Final Thoughts: Deep Insights You Won’t Hear at Conferences

With national carrier surcharges climbing again, regional and hybrid carrier strategies aren’t a “nice-to-have”; they’re an edge. More brands will shift this way as delivery economics get tighter, especially for free shipping models or returns.

1. Carriers aren’t passing through costs, they’re engineering margin. Fuel surcharge hikes even as diesel drops prove the point.

2. Volume shifting is the insurer of margin in a hypercharged rate environment. But it demands smart segmentation; customers are willing to wait, until they aren’t.

3. Invoice audits deliver net margin boosts. Often reclaiming unseen dollars if you missed subtle new fees.

4. Packaging isn’t just aesthetics, it’s your Zone Minimizer 2.0. Even an inch past the threshold can break the unit cost math.

5. Communication is your invisible margin guardrail. Customers who understand delivery trade-offs don’t return orders or create customer service tickets; they convert quietly and joyfully.

Look, this isn’t a temporary blip; it’s a pricing realignment. There’s blood in the water. And those who treat it like a rounding error are the ones who’ll be squeezed hardest. With carriers shifting to aggressive surcharge strategies and volume declines ongoing, the brands that survive (and thrive) are those that pivot fast, audit hard, and control the conversation.

And you don’t need to choose between slow, cheap shipping and fast, expensive shipping. You need better shipping math. The brands winning in 2025 aren’t necessarily paying less; they’re paying smarter. Every package is a micro-optimization opportunity. And in this new era of quiet cost creep, your bottom line depends on seeing and solving for the full picture.

Frequently Asked Questions

Should I always redirect lightweight shipments to economy services?

If you’re scaling shipping and have many items under 3 lb, testing slower economy options like FedEx Ground Saver or USPS Ground Advantage is smart, especially when rate drops are significant and customer expectations can be managed.

How often should I audit shipping invoices?

Monthly or quarterly audits work best to catch fuel surcharge hikes, zone realignment fees, and other hidden charges that carriers apply mid-cycle without warning.

Are regional carriers worth the complexity?

Yes, in high-density zones they can cut costs by up to 20%, while reducing reliance on large-carrier surcharges. But you need solid tracking and exception management controls in place.

How can I package smarter to reduce DIM weight?

Use cartonization software to right-size boxes, choose bubble mailers or polybags for lightweight items, and keep a log of package size variances, especially if you’re using automated packing stations.

Will shifting ground volume hurt customer satisfaction?

Not if it’s communicated correctly. By clearly labeling delivery expectations and offering optional upgrades at checkout, most customers see slower ground as an acceptable trade-off for free or lower-cost shipping.

Let’s get one thing out of the way: buying carbon offsets isn’t a silver bullet. Sure, they might make a brand feel better. Throw some money at a reforestation project, slap a “carbon neutral” badge on the website, and call it a day. But customers? They’re not fooled anymore. The modern ecommerce shopper is savvier, more eco-aware, and has a nose for greenwashing from a mile away. With the rise of ecommerce, online returns have become increasingly common, adding new layers of complexity to sustainability efforts.

So, what can a brand actually do to make ecommerce returns more sustainable without hiding behind offsets and hope? Returns are the ecommerce world’s dirty secret. Returns significantly affect the environment by increasing emissions, packaging waste, and resource use due to the logistics involved in processing returned items.

Let’s talk about it.

Returns: The Hidden Carbon Emissions Sustainability Sinkhole

Returns are the ecommerce world’s dirty secret. That stylish jacket that gets sent back because the fit’s off? It’s not always going back on the shelf. Sometimes it’s rerouted halfway across the country, sometimes it’s trashed. Literally. Return parcels often travel long distances, sometimes internationally, adding significantly to carbon emissions.

According to industry estimates, ecommerce returns generate over 15 million metric tons of carbon emissions per year. Return shipping is a major contributor to these emissions, as the logistics of moving products back through the supply chain are often more complex than the original shipment. That’s not counting the packaging waste, the reverse logistics, or the markdown losses that fuel overproduction. In fact, the emissions from returns can be up to 30% higher than those from the initial delivery, and the return process can take up to three times longer than the initial delivery time, further increasing environmental strain.

And it’s only getting worse.

Returns are expected to increase in volume as online shopping keeps growing. Which means if a brand is serious about sustainability, this is the battleground. This is where the carbon battle is won or lost. Optimizing the return process is essential to reducing environmental impact and achieving true sustainability.

The Problem with Offsets

First, what are carbon offsets? Carbon offsets are a way to compensate for greenhouse gas emissions by funding projects that reduce or remove those emissions elsewhere. They represent a financial instrument, often in the form of carbon credits, that can be bought and sold to offset a company’s or individual’s carbon footprint. Essentially, you pay someone else to reduce emissions so you can balance out your own impact. Some refer to this practice as “greenwashing,” that is, misleading marketing that creates a positive public image as it relates to sustainability efforts, when in reality, companies are simply throwing money at the problem.

Offsetting carbon emissions has become the default sustainability strategy for many ecommerce brands. But let’s call it what it often is: a shortcut. It’s easier to buy carbon credits than to rethink logistics. But it’s also increasingly under scrutiny.

Customers and regulators alike are asking hard questions:

• Are these offset projects even real?
• Are they additional (i.e., would they have happened anyway)?
• Are they permanent?
• Are they actually reducing emissions or just moving guilt around?

If the answer to any of those is fuzzy, that shiny “carbon neutral returns” badge starts to look more like PR theater than real progress.

The Role of Fast Fashion in Ecommerce Returns

Fast fashion is a major driver behind the mountain of ecommerce returns and the environmental impact that comes with it. The fashion industry records some of the highest return rates, thanks to a business model built on rapid trends, low prices, and disposable products. This cycle encourages customers to buy more, try more, and return more, often with little thought to the consequences.

The result? A huge environmental impact. Every returned fast fashion item means more transportation, more packaging waste, and substantially more emissions. Many of these items are made from low-quality materials, making them harder to resell or recycle and more likely to end up in landfills.

Online retailers in the fashion industry can help break this cycle by adopting sustainable return processes. This means making it easier for customers to get sizing and fit right the first time, offering detailed product information, and encouraging customers to think twice before making impulse purchases. By promoting mindful shopping and streamlining return processes, online retailers can reduce unnecessary returns and their associated emissions, helping to create a more sustainable future for fashion.

What to Do Instead: Real Strategies for Sustainable Returns

Let’s dig into actual solutions that reduce the carbon footprint of ecommerce returns without playing the offset game.

1. Don’t Ship What Doesn’t Need to Be Returned

Before we talk transportation, let’s talk logic. Some returns just… shouldn’t happen. For instance:

• Low-cost items where shipping back costs more than the refund.
• Used or damaged items are better suited for resale, donation, or recycling.

Free returns policies often encourage customers to return more products, even when it’s unnecessary. As a result, customers return a significant percentage of online purchases, especially in categories like clothing, leading to high volumes of returns. This means customers sending back items unnecessarily, which increases emissions, packaging waste, and environmental impact.

Amazon, Target, and others are experimenting with “keep it” policies. It’s not charity, it’s math. And it slashes emissions.

Pro tip: Offer refunds or store credit for certain items without requiring them to be shipped back. Flag these automatically by value or category.

2. Make Online Returns Local

Centralized return centers? Good for control. Bad for emissions. Every mile adds CO₂. When return parcels travel long distances to centralized locations, they significantly increase carbon emissions. Return shipping over extended routes not only raises costs but also has a substantial environmental impact.

Instead, build a distributed returns network using local micro-fulfillment centers, third-party dropoff points (like Happy Returns), or even store partners. Let returns travel shorter distances and restock closer to the next buyer, optimizing the returns process for local returns.

Pro tip: If you run a Shopify store, check out apps that integrate dropoff points or enable peer-to-peer returns.

3. Sell Returns Before They Ship

This one’s juicy. Some startups (yes, Cahoot is in this space) are enabling returns rerouted directly to the next buyer.

Say a customer in Dallas returns a pair of shoes. Instead of shipping them to a return hub in Ohio, list them instantly on your site as “open box,” and fulfill the next order right out of the first customer’s hands. The resale value of these products is a key economic consideration, as it may not always cover the expenses involved in the returns process. But in general, fewer miles, less waste, happier planet.

Pro tip: Market “returned but good as new” inventory as a value-conscious, sustainable choice for the next buyer.

4. Fix Fit, Friction, and Frustration

A huge chunk of returns aren’t defects; they’re disconnects.

• “This doesn’t fit like I thought it would.”
• “The color’s off.”
• “I didn’t realize it needed batteries.”

These issues often arise when customer expectations are not clearly set or managed. Meeting or exceeding customer expectations through clear product information and communication is crucial to reducing returns.

Every return like that is a failure of expectation-setting. Use smarter sizing guides, AR try-on tools, richer product pages, and yes, better post-purchase communication to prevent avoidable returns altogether.

Pro tip: Track return reasons obsessively. Fix the upstream problem.

5. Consolidate Reverse Logistics

Every one-off return is a sustainability nightmare. Smart brands offer:

• Scheduled return pickups
• Bundled return shipments
• QR-code dropoffs that batch items into optimized routes

Optimizing returns processes is crucial for sustainability; streamlining each step reduces waste and environmental impact.

Instead of one label, one box, one truck, turn returns into networked events. Fewer trips, fuller trucks, smaller footprint.

Pro tip: Work with 3PLs or carriers that offer consolidated reverse logistics as part of their service model.

6. Rethink Packaging and Waste

Packaging is often the first thing customers see, and the first thing they throw away. Rethinking packaging and waste is a powerful way to shrink the carbon footprint of ecommerce returns. Start by swapping out traditional materials for sustainable packaging options: think biodegradable mailers, recyclable boxes, and paper-based alternatives to plastic bubble wrap.

But don’t stop there. Encourage customers to reuse packaging for their returns, or even for other purposes at home. A simple “reuse and recycle” message in your return instructions can go a long way toward minimizing waste. Some brands even offer incentives for customers who return items in their original packaging.

By prioritizing sustainable packaging and minimizing waste, online retailers can cut environmental costs and help build a more sustainable future, one return at a time.

7. Leverage Technology for Smarter Returns

Technology is a game-changer when it comes to optimizing return processes and reducing environmental impact. Virtual try-on technology lets customers see how clothes or accessories will look and fit before they buy, slashing the number of returns due to poor fit or style mismatches. This not only enhances customer satisfaction but also reduces the environmental footprint of online shopping.

AI-powered return management systems can further streamline return processes for online retailers. These tools can predict which items are most likely to be returned, automate approvals, and even suggest the most sustainable route for each return. The result? Faster, smarter returns that use fewer resources and generate less waste.

By embracing technology-driven solutions, online retailers can deliver a more positive customer experience while making meaningful progress toward sustainability.

The Importance of Transparency and Accountability

In the ecommerce industry, transparency and accountability are non-negotiable for reducing the environmental impact of returns. Customers want to know exactly how their returns are handled, where items go, how waste is minimized, and what steps are being taken to reduce emissions.

Online retailers should clearly communicate their return policies and processes, making it easy for customers to understand what happens after they send something back. This includes being upfront about efforts to minimize waste, use sustainable materials, and optimize return processes for lower emissions.

By holding themselves accountable and sharing their progress, online retailers can build trust, set themselves apart in a crowded market, and drive the entire industry toward more sustainable practices.

Reducing Environmental Impact through Education

Education is a powerful tool for reducing the environmental impact of ecommerce returns. Online retailers have a unique opportunity to inform customers about the environmental costs of returns and the benefits of making more sustainable choices.

This can be as simple as including information on product pages about the carbon footprint of returns, or as involved as partnering with environmental organizations to promote sustainable shopping habits. By raising awareness and encouraging customers to think before they buy or return, retailers can help shift behavior toward a more sustainable future.

Empowering customers with knowledge not only reduces waste and emissions but also strengthens brand loyalty and positions online retailers as leaders in building a more sustainable ecommerce industry.

The Bigger Picture: Returns as a Circular Opportunity

Sustainability isn’t just about less carbon. It’s about less waste, less overproduction, and more reuse. Using more sustainable materials in returned products can significantly reduce the environmental impact and support circularity.

Returned items don’t have to be liquidated, dumped, or buried in clearance tabs. With the right tech stack and reverse logistics flow, returns can fuel:

• Refurbished product lines
• Second-chance marketplaces
• Loyalty-building exchanges
• In-house recommerce

However, the process of handling returns often generates extra packaging materials, excess packaging, plastic packaging, plastic waste, and plastic packaging waste, all of which contribute to environmental impact and landfill accumulation. Returned synthetic products can emit plastic particles, further polluting the environment. Improper disposal of returned goods can even result in open-air dumping sites, as seen in some regions.

The scale of the problem is massive, with billions of pounds of returned products, specifically, 9.5 billion pounds, ending up in landfills each year. These practices contribute to global carbon emissions, greenhouse gas emissions, and CO₂ emissions, highlighting the true environmental cost of ecommerce returns. Many synthetic materials in returned goods are produced using fossil fuels, compounding the emissions problem.

Certain categories, such as consumer electronics, present unique challenges due to hazardous materials and recycling difficulties. Compared to returns from online shopping, in-store purchases generally have lower return rates and generate less waste, making them more sustainable options. Thus, traditional shopping contributes less to packaging waste and emissions than ecommerce.

Online shopping returns and ecommerce returns, however, are associated with higher rates of returns, more packaging waste, and greater environmental cost. Online shopping leads to increased waste from online purchases, and the percentage of returns from online purchases varies widely by industry. The fashion industry recorded some of the highest return rates, further amplifying the issue.

The same emissions generated by reverse logistics, repackaging, and landfilling of returns are comparable to those produced by millions of cars. Paper waste is another significant byproduct of inefficient return processes.

Both consumers and retailers share responsibility for reducing the environmental impact of returns. Adopting sustainable practices can improve customer loyalty and demonstrate environmental responsibility, helping brands improve customer loyalty and build long-term trust.

Brands like Patagonia, Lululemon, and IKEA are already piloting resale programs that give used items a second life. This isn’t fringe. It’s the new mainstream. Swapping plastic packaging for more sustainable alternatives is another step brands can take to reduce waste and support circularity.

Pro tip: Create a branded “like new” collection and route eligible returns there instead of the liquidation abyss.

TL;DR: Stop Offsetting, Start Optimizing

If your entire returns sustainability strategy hinges on buying carbon credits, it’s time for a reboot.

Ecommerce brands have a huge opportunity to lead by:

• Reducing returns in the first place
• Routing them smarter and shorter
• Repurposing returns into value
• Implementing infrastructure that supports circular commerce

And you don’t need to be a $1B DTC darling to do this. Start small. Automate smarter. Ask better questions.

Because no amount of offsets will fix a broken process.

Frequently Asked Questions

How can ecommerce brands reduce return-related carbon emissions without offsets?

By using regional return hubs, minimizing return shipments through virtual try-ons or better sizing tools, and refurbishing items locally instead of reshipping them.

Why are carbon offsets considered greenwashing by some experts?

Because many offsets don’t reduce emissions at the source, they often act as a license to pollute rather than driving systemic sustainability improvements.

What are practical alternatives to carbon offsets for online retailers?

Implementing smart return routing, peer-to-peer resale, local drop-off partnerships, and clearer product education can meaningfully reduce returns emissions.

Do returns really make a big environmental impact?

Yes, especially when returns are shipped back, repackaged, restocked, or discarded. Each step contributes to carbon output, waste, and energy use.

How can ecommerce brands make their returns policy more sustainable?

Start by making returns frictionless but intentional: require reason codes, incentivize exchanges, offer local return options, and prioritize reuse or donation of returned items.