The Post Office Wants to Raise the Fees it Charges Amazon and Other Shippers
In this article
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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Free Shipping Becomes a Blessing and Curse at Amazon and Target
In this article
Amazon.com Inc. and Target Corp. have opened the floodgates on free shipping. Web orders with the free service have increased 13% in 2018. Offer can boosts sales but wreaks havoc with profit margins.
Recent moves by the two retailers to eliminate minimum-purchase amounts for free shipping have boosted the share of online orders that get delivered gratis, according to data from retail analytics company DynamicAction. Orders with the free service included have risen 13 percent so far this year through Nov. 16, including an 18 percent spike in the week that began Nov. 5., when Amazon unveiled its offer.
Free Falling
Amazon and Target have eliminated shipping fees for online holiday orders
“Free shipping is the new normal,” DynamicAction’s Chief Marketing Officer Sarah Engel said.
While free shipping can entice customers to buy, it can wreak havoc with retailers’ profit margins, which are typically razor-thin already during the holiday quarter due to rampant discounts and increased marketing costs. Web orders that included some sort of promotion since the end of October have risen 13 percent from the same period last year, DynamicAction found. It also doesn’t help that transportation costs were already soaring this year due to a shortage of truckers.
Target is offering two-day free shipping from Nov. 1 through Dec. 22 on hundreds of thousands of items with no minimum purchase, while Amazon said on Nov. 5 that shoppers without Prime memberships need not buy at least $25 to earn free regular shipping, which typically takes five to eight business days.
Walmart Inc. has thus far declined to match the offers, sticking with its $35 minimum purchase requirement. The world’s largest retailer has suffered from narrowing gross profit margins in recent quarters, even as its online sales have grown.
E-commerce sales overall will jump 17 percent this holiday season, according to data tracker EMarketer, and account for about 12 cents of every holiday dollar spent. Amazon garners just under half of all online sales in the U.S., EMarketer said.
This article was written and published at Bloomberg by Matthew Boyle
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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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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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2019 General Rate Increase (GRI) for USPS, FedEx and UPS
In this article
2 minutes
USPS
USPS announced its GRI will take effect January 27, 2019.
The Details:
– Priority Mail Express will increase 3.9%
– Priority Mail will increase 5.9%.
– Mailing Services product prices will increase 2.5%
– First-Class Package Service will move to zone-based pricing
– First-Class Mail Forever stamps will increase from $.50 to $.55
USPS’ dimensional weight (DIM) pricing is also increasing substantially. Currently, the Postal Service only uses DIM pricing for Zones 5-9 Priority Mail. In Q2 2019, expect USPS to implement DIM pricing for all Priority Mail, Priority Mail Express and Parcel Select packages that are larger than one cubic foot. Furthermore, the DIM will be reduced from 194 to 166—a small change that can have a big impact on parcel shipping costs. https://about.usps.com/news/national-releases/2018/pr18_086.htm
FedEx
FedEx announced its GRI will take effect January 7, 2019.
The Details:
– FedEx Express and FedEx Ground will increase by an average of 4.9%
– FedEx Freight will increase by an average of 5.9%.
– Look out for changes to FedEx surcharges and minimums
– FedEx Express and Ground minimum increases will range from 3.5% to 5.4%.
Remember, increases will not be implemented across the board. While FedEx Express and Ground report that “on average” rates are going up 4.9%, some categories will experience hikes as high as 8.2%. For example, Surcharges and Fees will be increasing in most cases upwards of 5%, and the Print return labels pricing is doubling. Be aware of how you send packages and take action if necessary to soften the blow of the increases. https://www.fedex.com/en-us/shipping/current-rates.html
UPS
Most of UPS’ GRIs take effect December 26, 2018.
The Details:
– The rates for UPS Ground, Air and International services will increase an average 4.9%.
– Fuel surcharges will apply to Additional Handling, Over Maximum Limits, Signature Required and Adult Signature Required accessorials.
– A $2.00 processing fee per package will be charged when Package Level Detail (PLD) is not provided to UPS prior to delivery.
– The rates for certain value-added services and other charges will increase. https://www.ups.com/us/en/shipping/rates-update.page?WT.mc_id=VAN701700
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Amazon FBA Fees to Increase in 2022
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6 minutes
On January 18, 2022, Amazon will increase FBA fees for fulfillment, removal, and disposal. It will then follow up on those changes with increases to storage fees on February 1st, along with a brand-new long-term storage fee that will kick in on inventory sooner than the current 365 days.
Many Amazon FBA sellers struggle with the slim margins imposed by fierce competition, so even seemingly small changes have an outsized impact on a business plan. Read on to make sure that you know exactly how much more you’ll have to pay Amazon in 2022 in FBA fees, and decide whether it’s time to come up with an Amazon FBM backup plan.
How are Amazon FBA Fees Changing in 2022?
Unsurprisingly, Amazon FBA fees in 2022 will increase across the board. All of the biggest categories will see increases – fulfillment fees, storage fees, and removal and disposal. So – what are those changes?
Amazon FBA Fulfillment Fee Changes
Amazon will hit every size tier with a fulfillment fee increase, and percentage increases will range from 2% on the low end to as much as 12% on the high end.
Source: Amazon Seller Central
Notably for many sellers, each of the Small Standard categories will see an increase of 8%. For the smallest items, that will result in a $0.22 increase, and for the larger items in that range, the fee will go up by $0.27. It sounds like a small increase, but sellers know how much even ten cents matters for small, low-margin products. This change will cut already-thin margins and likely force some sellers into the unenviable choice of either dropping part of the product line or raising prices and risking a severe drop in sales.
An Amazon FBA seller on r/FulfillmentByAmazon sums up the dilemma well: “If I was assessed the [2022] FBA fees retroactively for the past 4 months it would average out to a cut of 22.5% at the unit level net profit. All you can do is raise prices, but when Amazon is your competitor, that’s not always possible. Great.”
Amazon FBA Storage Fee Changes
Of course, Amazon isn’t stopping at raising fulfillment fees. They will make two separate changes to FBA Storage Fees – 1) they’ll raise rates and 2) they’ll institute a new, more punishing long-term storage fee.
FBA Storage Fees will increase by $0.08 per cubic foot, or 10.6% on February 1st, 2022. Like the fulfillment fee rate increase, this is a seemingly small change, but given that Amazon FBA sellers are already operating in a cutthroat, low-margin environment, the overall effect of a few small changes to fees can be punishing.
On top of that, Amazon is also tightening their definition of long-term storage. On May 15th, 2022, they will introduce a brand-new “aged inventory surcharge” to units that have been in Amazon’s fulfillment centers for 271 to 365 days. While that time period used to accrue zero additional storage fees, it will now add $1.50 per cubic foot on top of regular storage fees, nearly tripling storage cost.
There’s simply more demand for FBA than Amazon can fulfill, so they’re able to make changes like this to squeeze more out of sellers and cut all but the best sellers out of their network. This is the logical extension of changes like their April 2021 adjustment to FBA inventory limits, which are designed to optimize what inventory sellers place with FBA and punish those who don’t adhere to their ever-stricter standards.
Amazon FBA Removal and Disposal Fee Changes
Finally, Amazon is more than doubling the Removal or Disposal Order Fee for most SKUs. Missing on a new product, or getting undercut and outcompeted is about to become a lot more expensive. If you keep trying to sell a struggling product, you’ll face the early kick-in to long-term storage fees as detailed above. If you decide to cut the product, you’ll pay much more per unit.
In fact, every product size except for the smallest will see its Removal or Disposal Order Fee more than double. A SKU between 1-2 lbs, for instance, will increase for $0.35 to $0.75 per unit – a 114% jump.
As mentioned above, this change is aimed squarely at removing all but the fastest-moving SKUs from Amazon FBA. If you’re uncertain about how a new product will perform, or you see existing products getting undercut and pushed out of the Buy Box by cheap competition (or competition from Amazon itself), then you need an efficient Amazon FBM solution to keep selling.
Cahoot’s Alternative to Amazon FBA
Cahoot’s excellent FBA alternative can fully replace FBA or serve as an affordable backup. And it’s much more than that – it’s the most flexible solution in the marketplace and easily integrates and ships orders for every eCommerce sales channel. With our innovative peer-to-peer fulfillment network, multi-channel fulfillment with nationwide 1-day and 2-day delivery is the norm.
Unlike other networks that are collections of 3PLs, Cahoot’s innovative approach empowers merchants across the country to fulfill orders for one another. Our peer-to-peer network is a collective of highly vetted eCommerce retailers who offer up excess warehouse space and resources to provide high-quality order fulfillment to other merchants.
As a result, costs are typically lower than what you get with a traditional 3PL fulfillment company, and service levels are higher. Merchants can use the network solely for outsourced fulfillment – similar to FBA, or they can choose to fulfill orders for other merchants and offset some of their own outsourced fulfillment costs.
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Cahoot Partners with Walmart Marketplace to Enable Online Retailers to Offer Nationwide 1-Day and 2-Day Delivery
Marketplace Sellers Leverage Peer-to-Peer Fulfillment to Grow Sales with Affordable Nationwide Fast Shipping.
BRIDGEPORT, CT (August 30, 2021) – Cahoot, the world’s first peer-to-peer eCommerce fulfillment network, announced its partnership and integration with Walmart (NYSE: WMT). Cahoot is now a certified shipping and fulfillment solution for Walmart’s marketplace sellers.
Cahoot’s revolutionary peer-to-peer fulfillment model enables brands and online retailers to affordably provide one-day and two-day delivery nationwide. With its rapidly growing network of eCommerce order fulfillment centers coast-to-coast, Cahoot is quickly becoming the fulfillment provider of choice for high-volume sellers on marketplaces such as Walmart, Amazon, and eBay and eCommerce platforms such as Shopify, BigCommerce, and Magento.
“We’re excited to integrate with Walmart ahead of the record-breaking holiday season just around the corner,” said Cahoot Founder and CEO Manish Chowdhary. “The industry’s rapid growth has fulfillment capacity bursting at the seams. Our novel peer-to-peer model solves this problem by unlocking thousands of eCommerce merchants’ excess warehouse space and fulfillment capacity. Collectively, the Cahoot network is doing for eCommerce fulfillment what Airbnb did for lodging.”
A Reliable Solution for Walmart’s Free 2-Day Delivery Program
Cahoot’s Walmart Marketplace Integration enables approved sellers to participate in Walmart’s 2-Day delivery program and display the Free 2-day shipping badge on their marketplace listings. Walmart has observed that sellers with this badge enjoy an up to 50% increase in conversion, making it one of the most powerful ways sellers can grow their sales. To help merchants delight their customers with exceptional delivery experience, Cahoot provides affordable same-day fulfillment 6 to 7 days a week and maintains a strict service level agreement of 99.95% on-time fulfillment and 99.9% order accuracy.
Flexible Across Channels & Works Seamlessly with In-House Operations
The patented Cahoot eCommerce order fulfillment platform provides eCommerce merchants with unsurpassed ease of use and complete visibility into inventory, orders, fulfillment performance, and package tracking – across all sales channels. Unlike traditional 3PL networks, the Cahoot network can seamlessly integrate with existing merchant fulfillment, which upgrades their strategy without introducing more complexity. With Cahoot, orders automatically flow to the optimal shipping point, whether it’s a Cahoot fulfillment center or the merchant’s own warehouse.
Cahoot has really helped us grow our multi-channel sales. We use Cahoot to fulfill our Walmart 2-Day orders and our Amazon standard and SFP orders. In addition to saving us money, we really like that their software and their fulfillment network work seamlessly with our own in-house fulfillment operations. Our old 3PL couldn’t do that.
Kris Koesema
Battery Jack
The Power of Many
Like the Airbnb marketplace of homeowners and travelers, the patented Cahoot order fulfillment network brings together the collective power of SMBs and their warehouses to fulfill orders, thus reducing fulfillment costs and expediting delivery.
Cahoot is available for merchants looking to expand their reach for one- and two-day delivery services across all selling channels, including Amazon, Walmart, eBay, Shopify, BigCommerce, and more. Merchants can reach a Cahoot fulfillment expert at www.Cahoot.ai.
ABOUT CAHOOT
Cahoot is the world’s first peer-to-peer eCommerce fulfillment network. It helps online businesses offer nationwide 1-day and 2-day deliveries. In addition, Cahoot’s model is the lowest cost by design because it enables merchants to store and ship merchandise for each other. This novel business model also allows merchants to make extra money using their existing warehouse space and personnel.
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Amazon’s One-Day Shipping: The Real Story for Retailers
In this article
If Amazon owns nearly half of the $513 billion U.S. ecommerce market, why the need to offer one-day free delivery? The key to this decision is Amazon’s singular obsession with customer centricity and an appreciation for indirect results that don’t even register on the radar of some competitors.
If Amazon owns nearly half of the $513 billion U.S. ecommerce market, why the need to offer one-day free delivery? The key to this decision is Amazon’s singular obsession with customer centricity and an appreciation for indirect results that don’t even register on the radar of some competitors.
Insights abound for those able to get past the headlines. Here are three of the most important takeaways that were either overlooked or under-covered in the media frenzy.
- Rock the Customer Experience or Die
- ROI Needs a Radical Rethink
- Double Down on Innovation, Play to Your Strengths
With the expenses involved in offering free shipping, it’s not hard to see why Amazon’s annual shipping bill is set to exceed $7 billion dollars according to the latest estimates. Retailers often opt to pass these costs on to their customers or offer ecommerce order fulfillment options that won’t leave them substantially in the red, but they’re missing the point.
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Shippers Beware: New USPS Dimensional Pricing Coming June 23
In this article
The second phase of the United States Postal Service changes kicks in on June 23, 2019. USPS is changing the way it charges for boxes shipped via Priority Mail, Priority Mail Express as well as new international weight limitations. Currently, USPS applies a dimensional divisor (DIM) of 194 for boxes that exceed one cubic foot in volume, and DIM only applies to zones 5 and above. Starting June 23, 2019, the DIM divisor will be reduced to 166 and will apply to ALL zones (local and 1-9) for Priority Mail, Priority Mail Express and Parcel Select.
The second phase of the United States Postal Service changes kicks in on June 23, 2019. USPS is changing the way it charges for boxes shipped via Priority Mail, Priority Mail Express as well as new international weight limitations. Currently, USPS applies a dimensional divisor (DIM) of 194 for boxes that exceed one cubic foot in volume, and DIM only applies to zones 5 and above. Starting June 23, 2019, the DIM divisor will be reduced to 166 and will apply to ALL zones (local and 1-9) for Priority Mail, Priority Mail Express and Parcel Select.
The first phase of USPS rate hike went into effect in January earlier this year.
Retailers doing order fulfillment must also provide dimensions when the package cubic volume measures over one cubic foot (1,728 inches) while generating labels. Shippers are also encouraged to provide dimensions for all packages and allow for configurable dim divisors to support future changes. Negotiated Service Agreements (NSAs) will be allowed to have a configurable dim divisor for each Zone at this present time.
If you are a USPS shipper, this will impact you. Let’s see this via the following example.
|
Dimensions |
Old Price |
New Price (effective June 23) |
Price Increase |
|---|---|---|---|
|
15 x 12 x 10 |
10 Pounds (194 DIM) = $26.85* |
11 Pounds (166 DIM) = $29.00* |
$2.15 (8% INCREASE) |
*Priority Mail Retail Rates to Zone 5
While the DIM change from 194 to 166 will certainly impact some postal shippers, it’s important to know that the Postal Service will continue to apply actual weight for packages that don’t exceed one cubic foot in volume. That is, if the cubic volume of a box doesn’t exceed 1728 inches, the charge will continue to be based on the actual weight (not DIM weight).
That’s not all. The Postal Service will also revise the weight limitation for First-Class Mail International (FCMI) flat pieces to 15.994 oz. to more closely align the definition of FCMI large envelopes (flats) with that of the Universal Postal Union Conventions.
For FCMI flats that are over 15.994 oz., USPS will not process those as FCMI starting June 23, instead, you will need to classify and mail those pieces under First-Class Package International Service (FCPIS).
You could alternatively elect to use another class of mail such as Priority Mail Express International or Priority Mail International, if the mail piece meets the requirements for those mail classes.
Below are few strategies for offsetting the impact of the new DIM billing:
1. Move package volume from USPS to FedEx/UPS or other parcel carriers. High-volume shippers can negotiate deeper discounts and more favorable DIM divisors. Many regional carriers offer shipper-friendly DIM divisors compared to the large national carriers. The large national carriers right now may be more open to offering special incentives to shippers as they try to offset the loss of business from Amazon.
2. Try to get commercial base pricing (CBP) or commercial plus pricing (CPP). Most Cahoot merchants qualify for special CBP and CPP pricing; please contact us if you are not enjoying these rates already. High-volume shippers can get even deeper discounts by pursuing a negotiated services agreement (NSA) with the Postal Service or through authorized postal resellers. These discounts could offset DIM increases, at least in the short-term.
3. Improve packaging. By reducing excess box dimensions and minimizing fill, shippers can reduce the impact of dimensional pricing, reduce corrugated and packing material costs, and reduce carbon emissions.
4. Optimize via Cahoot. By joining Cahoot’s innovative peer-to-peer ecommerce order fulfillment networkTM, you can convert say a zone 8 shipment to a zone 2 shipment. You save big which more than makes up for any DIM billing increase, plus the packages get delivered to your customers faster.
If you haven’t yet considered the impact of the upcoming June 23 changes, you could be looking at an 8 percent-plus increase on some or more of your USPS packages. Please contact a Cahoot Expert, if you need help or would like to learn more.
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