It’s important to keep an eye on the costs of running your business, especially when they’re changing. With the new year coming up, you can expect some changes to your shipping costs, which may factor into both your shipping strategy and pricing strategy for 2019.
Every year, shipping carriers review their pricing and make adjustments to their shipping rates due to fuel costs and industry demands. These updates are normally implemented in January of the new year, so now’s the time to prepare for upcoming rate changes.
We’re here to provide an overview of the rate increases coming in 2019, and to help you optimize your shipping and fulfillment strategy in light of these changes.
Upcoming rate changes
All of the carriers supported by Shopify Shipping are set to increase some of their rates in 2019. Here’s an overview of the expected retail price changes for USPS, UPS, and DHL Express in the US, and Canada Post in Canada. Full details can be found in the Help Docs.
If you’re shipping via Shopify Shipping, remember that you get access to negotiated rates with each carrier—so while you may see an increase in your shipping rates as well, you’ll still get lower rates on Shopify than you would at retail counters.
Effective December 26, 2018
In late December, UPS retail prices will increase by an average of 4.9%. With Shopify Shipping, save up to 55% off retail prices for UPS shipping rates.
Here’s how retail prices for some popular shipping services will be affected:
- UPS Ground will increase by an average of 5.2%
- UPS 2nd Day Air will increase by an average of 7.2%
- UPS Standard (to Canada) will increase by an average of 1.8%
If you’re using Shopify Shipping, the residential fee is still waived for domestic Ground and 3 Day Select shipments with UPS, and dimensional weight doesn’t apply for packages up to one cubic foot in volume for both services.
Effective January 27, 2019
In 2019, retail prices for most USPS services will increase. With Shopify Shipping, save up to 40% off retail prices for USPS shipping rates.
Here’s how retail prices for some popular shipping services will be affected:
- First-Class Package Service will change to zone-based pricing. That means the cost to ship will be determined by both the weight of your package and its destination. Previously, the cost was determined by the package weight alone.
- Balloon pricing for Priority Mail will be eliminated. Balloon pricing previously applied for packages weighing up to 20 pounds with a size between 84 to 108 inches in combined length and girth when shipping to zones 1-4. These packages will now be priced based on their actual weight.
- First-Class Package International Service will increase by an average of 3.7%
You can use the Shopify Shipping calculator to estimate the current rates you’d pay using existing USPS mail classes offered in Shopify Shipping.
Effective January 1, 2019
In 2019, DHL Express retail prices will increase by an average of 5.1% for their DHL Express Worldwide shipping service. With Shopify Shipping, save up to 77% off retail prices for DHL Express Worldwide shipping rates.
Effective January 14, 2019
In 2019, Canada Post retail prices will increase by an average of 4% domestically and 2% internationally. With Shopify Shipping, save up to 47% off retail prices for Canada Post shipping rates.
Here’s how retail rates for some popular shipping services will be affected:
- Xpresspost will increase by an average of 2.9%
- Small Packet USA Air will increase by an average of 2.0%
- Tracked Packet USA will increase by an average of 2.0%
Optimize your shipping strategy
The options available to adjust to the rate changes depend largely on what your current shipping strategy uses for pricing: free, flat-rate, or calculated shipping rates. Based on which one you’re currently using, you’ll have different courses of action you can take to adjust them.
If you offer free shipping, here are some of the options available:
- Do nothing. If you continue offering free shipping, you’ll need to absorb the increased cost of shipping once the rate changes take effect. Before moving forward, make sure you’re aware of your margins, and that you’ll remain profitable in the face of the increased costs.
- Increase product prices. If you increase your products’ prices to cover the increased cost of shipping, you’ll keep your margins the same. However, repeat customers may notice an increase in price, which could in turn impact purchase frequency.
- Switch to free shipping minimums. A good compromise between doing nothing and increasing product prices is to add a free shipping minimum. This is an effective tactic to increase your average order value, which can help offset the increased cost of shipping, and pass on the cost of shipping to your customers if their order falls below the threshold.
Flat rate shipping
If you offer flat rate shipping, here are some of the options available:
- Do nothing. If you continue offering flat rate shipping, you’ll need to be prepared to absorb the increased cost of shipping when the rate changes take effect. Make sure to check the impact this will have on your profit margins, and ensure it’s sustainable.
- Introduce or adjust your order value ranges. Your flat rates don’t need to be the same for every order. Instead, you can begin to offer a higher flat rate on small orders, and lower flat rates as cart sizes increase to help offset your increased shipping costs. If you’re already offering varying flat rates for shipping, you can adjust the ranges to account for the increased cost of shipping.
- Increase product prices. If you keep your flat rate shipping price the same and increase your product prices, you can maintain your current margins. However, repeat customers may notice the increase in price, which could lead to more time in between repeat purchases, or potentially a lower conversion rate.
- Increase your flat rate shipping price. Increasing the cost of shipping may lead to similar results as increasing your product prices, although you will likely see the impact in your abandoned cart rates. Shipping costs are one of the most common reasons for customers to abandon their carts, so to mitigate the impact you could implement or adjust your cart recovery emails.
If you offer calculated shipping, there are a few options that you could implement:
- Do nothing. If you do nothing and you use a calculated rates provider or app, the shipping rates displayed at checkout will automatically update to the 2019 rates. It’s important to keep in mind that shipping costs are one of the biggest factors leading to abandoned carts, so you may see a higher cart abandonment rate as shipping costs increase. If you’re using Shopify Shipping, you’ll see that your discounted shipping rates will still get passed on to the customer.
- Decrease your product price. Since your shipping rates will update automatically, you could decrease your product price to keep costs the same for your customers. If you’re considering this, it’s important to ensure that your margins are still sustainable given your new pricing strategy and that your pricing remains strategic for the rest of your business. For example, if you offer a premium product, you’ll want to ensure your prices still communicate the right message about your product’s quality.
Review your shipping strategy and adjust accordingly
While your existing shipping strategy can be adjusted to account for the rate changes taking effect in 2019, this may also present an opportunity to rethink your shipping strategy from the ground up.
If none of the modifications fit with your pricing strategy, your margins, and your ideal conversion rates, it may be time to consider testing a new strategy—from free to flat rate shipping, or from calculated to flat rate—or moving to a service like Shopify Shipping that can offer you discounts off of the retail prices.