Shipping your packages as a customer is one thing, yet shipping packages as an e-retailer is another. Transportation makes up 25-35% of the cost of a product, therefore, on a volume scale it is crucial to have a shipping system that is cost effective. Most e-retailers utilize worldwide carriers like UPS to conduct loads of shipping functions for them. If their shipping costs go up, it will directly effect the retailer.

Now with the latest news about UPS and their upcoming rates for 2014, retailers will definitely have to see how they will adjust to the rate changes. UPS has announced its’ rates will have an average increase of 4.9% in 2014, reported Internet Retailer. The new rates will actually become effective as of December 30th. of 2013. Where e-retailers will really experience the hit is in regards to small packages, which is what e-retailers mostly ship. This is what the president of LJM Consultants Ken Wood stated in the report, which is a firm that advises retailers and other shippers on shipping costs.

What happens with the increase of shipping costs by UPS, and even Fedex, is based on certain factors, which determines the types of freight that will go up the most. In the case with UPS, the price increase will actually affect lighter shipments more than heavier shipments. Both UPS and Fedex divide up their shipping destinations into zones and than bases the shipment rates on where the freight is going. For example, a shipper’s home zone traveling two zones over is shipping to Zone 3. Along with the weight classification, they both determine the overall shipment rate. The higher the combined weight and distance, the more the customer will pay.

With this in mind and the rate increase, e-retailers which ship packages that are ten pounds or less, will feel the hike in price by UPS the most. Ken Wood gave an example in the report of how a three-pound package to a zone seven will increase by 7.84%. This equates to a jump from $8.55 to $9.22. In contrast, to ship a 130-pount package to zone 5, will only go up by 2.61%, which equates to an increase from $65.01 to $66.71. For one small package for an e-retailer this doesn’t seem like much, however, when you calculate this in terms of high volume, it is a bit of an increase.

With the rate increase by UPS, many e-retailers will probably seek out new shipping strategies and concepts to get their products in the hands of their customers. Business trends are definitely changing as it relates to e-commerce. Customers are even wanting their packages faster, which has opened the door wide open for same-day delivery. This is the direction a number of e-retailers have turned to as another delivery solution. Large retailers such as Wal-Mart, eBay, Amazon, Macy’s, Target, and more, have all begun to engage in same-day delivery.

For long distances, UPS will probably be what e-retailers will have to continue to go with. However, the creation of closer fulfillment centers and shipping from physical retail stores, creates the viable option for same-day delivery to work. E-retailers can turn to a Same-Day Courier such as A1Express and have their online products delivered locally in a matter of hours. The Kansas City Courier has a national footprint as well, enabling it to assist e-retailers locally on a national scale.

Reference: 11.25.13, Internet Retailer, Paul Demery, Average UPS rates will go up 4.9% in 2014