Managing Through Record 2019 USPS Rate Increases
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Recently, the USPS proposed a record price increase. If approved, which is expected, the higher rates will go into effect on Jan. 27, 2019. This will be the biggest rate increase in USPS history. Amazon’s retail operating income would take a 5 percent hit from shipping cost inflation if the new rates take effect, according to Barclays.
Here are some of the significant proposed 2019 USPS Shipping rate changes:
- The elimination of Commercial Plus Pricing (CPP), where now Priority Mail pricing will match Commercial Base Pricing (CBP). Many e-commerce and subscription trade shippers will be facing a painful price increase with the elimination of CPP programs.
- A conservative 5.9 percent Priority Mail increase is expected, while First Class Flat Pricing will change to zone-based pricing with an expected 11.9 percent increase. For shippers with a high proportion of outer zone shipments, the increase will be appreciably higher (as much as 21 percent).
- Perhaps most concerning is the pending reaction of UPS and FedEx as they re-evaluate their “hybrid” postal delivery products that use the USPS for last-mile delivery. Buried in the postal rate change are increases ranging from 9 percent to 30 percent on the work-share rate structures used by UPS and FedEx.

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NRF Forms a Package Coalition to Lobby around USPS
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Total Retail’s Caitlin Sullivan and Joe Keenan discuss the National Retail Federation’s (NRF) new Package Coalition, a lobbying group in support of the U.S. Postal Service.
The coalition is being led by Amazon.com and other retail businesses, including QVC and Columbia Sportswear. In addition to analyzing the merits of the Package Coalition, the hosts offer tips for retailers to optimize their shipping rates.

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Both USPS and Amazon Experience Data Security Glitches
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In the midst of the kickoff to the busiest shopping season of the year, news emerged that both the U.S. Postal Service and Amazon experienced data glitches that exposed customer information.
The USPS may have exposed the personal data of more than 60 million customers via a security hole, including access to information on when checks and other critical documents were set to arrive. Amazon meanwhile told an unknown number of customers their names and email addresses were exposed due to a technical error on its ecommerce site.

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USPS Price Hikes on Jan. 27 to Cost Amazon More than $1 Billion
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Amazon.com Inc.’s retail operating income could take a 5% hit from shipping cost inflation if the U.S. Postal Service’s proposed price hikes go into effect, according to calculations by Barclays analysts. The proposed uptick in shipping and mailing fees at the U.S. Postal Service could cost Amazon more than $1 billion in 2019, according to Credit Suisse, which cut its near-term estimates for operating profit on the e-commerce behemoth.
“As we roll forward the sensitivity analysis to 2019, we arrive at a potential incremental Shipping Expense range of $400 million to $1.1 billion range with the assumption that 40 percent to 50 percent of U.S. packages are shipped via the Postal Service,” analyst Stephen Ju wrote Monday. “Our math …suggests Amazon will have 5% lower retail operating income from this shipping cost inflation, if we assume there are no offsetting factors,” Barclays said. The changes would go into effect on Jan. 27, 2019.
“Specifically, the USPS shipping rates for small and medium boxes, typically used by e-commerce companies, are proposed to be increased by 10% and 5% respectively,” Barclays analysts led by Ross Sandler wrote. “[T]he price increases for packages suggested by USPS this year are higher than in prior years.”

“If other Amazon shipping partners like UPS, FedEx, On-Trac, etc. raise their prices, which has happened in the past (but we are currently not factoring in), every 5% hike for last mile would weigh down operating income by an additional 3%, all else constant,” the note said.
President Trump said the USPS is Amazon’s “delivery boy” in a tweet earlier this year, and blamed the e-commerce giant for its billion-dollar-plus losses in the second fiscal quarter. However, the USPS said it’s actually government policy that’s hurting the group’s finances. The USPS said “legislative and regulatory changes” would be necessary for financial stability.
“To be clear, our current estimates already factor in [a] shipping cost increase by a modest level, consistent with prior years,” Barclays said. “However, the steeper increase proposed for 2019 could weigh further on Amazon’s FY19 profitability.”
Barclays forecast that Amazon shares could take a hit after third-quarter earnings if they are in line with guidance and forecast below expectations. And in the fourth-quarter, the $15 minimum wage hike will add about $310 million to expenses.
Amazon will already see declines due to the $15 minimum wage hike, analysts say. Barclays analysts think the minimum wage hike is just one of a few coming initiatives that could impact operating margin expansion.

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The Post Office Wants to Raise the Fees it Charges Amazon and Other Shippers
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The U.S. Postal Service has proposed a 9 to 12 percent increase in fees for the shipping service used by Amazon, just months after President Donald Trump criticized the USPS, saying it gives Amazon too good of a deal.
The parcel select service, which is also used by United Parcel Service and FedEx, is the last and typically the most expensive step in the shipping process that gets the packages to customers’ doorsteps. The USPS proposed a 9.3 percent increase on this service for packages weighing over one pound and a 12.3 percent increase on lighter packages.
Trump issued an executive order in April to set up a task force to examine the USPS, claiming that it was on an “unsustainable financial path.” He’s also tweeted that the USPS is Amazon’s “delivery boy” and doesn’t make money from Amazon’s business.

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UPS 2019 Rate Increase of 4.9% Given 3 Weeks Before Effective Date
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Less than three weeks before the prices take effect the day after Christmas, UPS announced its 2019 rate schedule, including an overall rate increase of 4.9% for its ground, air and international services, leaving shippers scrambling to adapt at the busiest time of year.
Last year UPS announced its general rate increase (GRI) in October, and in September the year before that. FedEx announced its 4.9% GRI for 2019 in early November. While the new FedEx rate schedule takes effect Jan. 7, UPS’s hike happens as of Dec.26, meaning it will hit the first massive wave of Christmas returns.
“This year (UPS) announced it three weeks before the effective date and in the heat of the fourth quarter peak shipping,” said parcel consultant Jerry Hempstead. “Large shippers will have little time nor the IT resources to sift through the nuances of this year’s announced changes.”

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Amazon Will Spend $800M to Bring Free One-Day Shipping to Prime
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At the company’s quarterly earnings call, CFO Brian Olsavsky disclosed that Amazon is working to shorten its promised two-day shipping on Amazon Prime to one day. It’s going to cost the company a lot of money, however.
At the company’s quarterly earnings call, CFO Brian Olsavsky disclosed that Amazon is working to shorten its promised two-day shipping on Amazon Prime to one day. It’s going to cost the company a lot of money, however.
Olsavsky said it would cost about $800 million, which will likely eat into Amazon’s bottom line in the coming quarters.
“We’re trying to take advantage of the fulfillment capacity and transportation capacity . . . that we have,” the CFO said. Amazon’s push for faster delivery has put a lot of pressure on other retailers to speed up their ecommerce order fulfillment.
As for a timeline, Amazon wouldn’t give too many specifics. “We expect to make steady programs quickly and through the year,” Olsavky said, but wouldn’t say whether it would be fully rolled out by the holidays.

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Shopify Fulfillment Network to Cut Number of Locations
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Late last week, Business Insider reported that Shopify Fulfillment Network is cutting contracts at several warehouses and fulfillment centers in the US, marking a potential shift in their strategy.
Today, they attempted to clarify the impending cuts by stating, “We will be making changes to the SFN (Shopify Fulfillment Network) to help merchants compete with big-box retailers, such as prioritizing two-day shipping at affordable prices and access to easy returns for U.S. shoppers.”
The company is expected to update sellers and the market on their strategic shift during its earnings call next month, but in the meantime, merchants are confused.
How does scaling down the number of SFN fulfillment locations in the US help merchants using SFN access affordable two-day shipping, as they attest?
Wedbush analyst Ygal Arounian sums up Shopify’s challenge well: “Shopify is nowhere close to building a type of fulfillment operation at the scale of Amazon, and investors should not expect anything like that in the near term”. Investors have taken notice of Shopify’s recent struggles – the stock is down nearly 50% from its November high of 1,690.60.

We’d assert that this change is more important for merchants than investors, as it reveals that Shopify Fulfillment Network isn’t an FBA alternative, and instead is moving in the opposite direction.
Merchants that want to power their sales with affordable, reliable fast shipping will need to look elsewhere for a fulfillment solution.
Shopify Fulfillment Network’s Pros & Cons
Like Amazon FBA, Shopify is building its own logistics solution for eCommerce sellers, Shopify Fulfillment Network.
It combines seamlessly with a merchant’s Shopify account, making it an easy way to start fulfilling eCommerce orders for someone with a new DTC store. It also comes with software that helps merchants with order and inventory management, and it boasts a dedicated customer service team that helps merchants overcome operational challenges.
Unfortunately for merchants with big growth ambitions, it’s focused on fulfilling Shopify orders and not orders from other channels. On top of that, it doesn’t offer fast shipping by default. Merchants that want to win on multiple channels will likely need an additional 3PL for their other orders. More importantly, they won’t be positioned to offer affordable fast shipping to their customers. With Amazon and other national fulfillment services setting the bar at 1- and 2-day free shipping, merchants that rely on SFN will be left at a significant disadvantage.
Make Returns Profitable, Yes!
Cut shipping and processing costs by 70% with our patented peer-to-peer returns solution. 4x faster than traditional returns.
See How It WorksCahoot: The Best Shopify 3PL
If you need a fulfillment solution that keeps up with Amazon FBA at always-affordable prices, give us a call.
Unlike Shopify Fulfillment Network, Cahoot’s fulfillment network has no trouble keeping up with FBA. We’ll help you level the playing field with marketplaces and delight your customers with a stellar, Amazon-like delivery experience – right on your Shopify store.
It sounds expensive, but our innovative peer-to-peer model offers low-cost fast fulfillment by design. As a result, our pricing is typically lower than that of other top providers, but we can beat them on fulfillment speed and reliability.
And of course, we don’t stop there. We have pre-built integrations with major marketplaces to fuel your multi-channel growth.
If you’d like to find out how Cahoot can help your business, please get in touch with us. We can’t wait to show you how Shopify fulfillment was meant to be.
FedEx Announces 2019 General Rate Increase
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FedEx Express and FedEx Ground will increase shipping rates effective Jan. 7, 2019 by an average of 4.9 percent, while FedEx Freight will increase by an average of 5.9 percent.
The change will impact the following: Express package and freight standard list rates for U.S., U.S. export and U.S. import services. In addition, there will be changes to FedEx surcharges and minimums also effective on Jan. 7

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Fast Company Recognizes Cahoot in the 2020 World Changing Ideas Awards
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New York, April 28, 2020 — The winners of Fast Company’s 2020 World Changing Ideas Awards were announced today, honoring the businesses, policies, projects, and concepts that are actively engaged and deeply committed to flattening the curve when it comes to the climate crisis, social injustice, or economic inequality.
New York, April 28, 2020 — The winners of Fast Company’s 2020 World Changing Ideas Awards were announced today, honoring the businesses, policies, projects, and concepts that are actively engaged and deeply committed to flattening the curve when it comes to the climate crisis, social injustice, or economic inequality.
Cahoot is an eCommerce order fulfillment network that helps online businesses offer nationwide free 1-day and 2-day delivery to its customers at no additional costs. It cuts down the distance packages need to travel by having nearby businesses store and ship products for each other. So instead of flying packages by air long-distance to customers, merchants can ship via economical and greener ground shipping. In 2019 alone, Cahoot has cut down more than 2 million miles of carbon emissions for its network members. Also, Cahoot’s peer-to-peer model allows merchants to offset storage and fulfillment costs by fulfilling orders for each other. Therefore, every merchant on the platform can ship locally and beat fast shipping standards with better margins. This year, Cahoot is awarded Honorable Mentions for The Best World Changing Idea in North America and the Experimental category.
Now in its fourth year, the World Changing Ideas Awards showcase 26 winners, more than 200 finalists, and more than 500 honorable mentions—with Health and Wellness, Corporate Social Responsibility, and AI and Data among the most popular categories. A panel of eminent judges selected winners and finalists from a pool of more than 3,000 entries across transportation, education, food, politics, technology, and more. The 2020 awards feature entries from across the globe, from Vancouver to Singapore to Tel Aviv.
Illustrating how some of the world’s most inventive entrepreneurs and companies are addressing grave global challenges, Fast Company’s May/June issue celebrates, among others, an electric engine for airplanes that eliminates emissions from flights—and expensive fuel from the tricky financial calculus of the airline industry; a solar-powered refrigerator that finally frees people in remote villages from daily treks to distant markets, transforming the economics of those households; an online marketplace that connects food companies with farms to buy ugly and surplus produce to fight waste; and an initiative to offset all of the carbon costs of shipping, creating a new model for e-commerce sustainability.
Make Returns Profitable, Yes!
Cut shipping and processing costs by 70% with our patented peer-to-peer returns solution. 4x faster than traditional returns.
See How It WorksCahoot aims to continue making the world a greener place while leveling the playing field in eCommerce. “The key to sustainable one-day delivery is having fulfillment centers close to customers and shipping them cheaply using ground services,” says Manish Chowdhary, founder and CEO of Cahoot. “It is near impossible for smaller brands to build a distribution network to compete on a level playing field. We need to change the game. We can’t work in siloes building our own facilities trying to compete against Amazon. The only way forward is to work together.”
“There seems no better time to recognize organizations that are using their ingenuity, resources, and, in some cases, their scale to tackle society’s biggest problems,” says Stephanie Mehta, editor-in-chief of Fast Company. “Our journalists, under the leadership of senior editor Morgan Clendaniel, have uncovered some of the smartest and most inspiring projects of the year.”
About the World Changing Ideas Awards: World Changing Ideas is one of Fast Company’s major annual awards programs and is focused on social good, seeking to elevate finished products and brave concepts that make the world better. A panel of judges from across sectors choose winners, finalists, and honorable mentions based on feasibility and the potential for impact. With a goal of awarding ingenuity and fostering innovation, Fast Company draws attention to ideas with great potential and helps them expand their reach to inspire more people to start working on solving the problems that affect us all.