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 2020.
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 2020, 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 retail rates in 2020. Here’s an overview of the expected changes for USPS, UPS, and DHL Express in the US, and Canada Post in Canada and how much you’ll save off retail costs when you ship with Shopify.
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 January 26, 2020
In 2020, retail prices for USPS services will increase by an average of 1.9%. Shopify continues to offer some of the lowest USPS rates available anywhere:
- Use First Class Package Service on Shopify and save up to 59% off retail rates. This is an improved discount level for the most common method for shipping packages up to 16 oz. through Shopify Shipping.
- Ship internationally using First Class International Package Service on Shopify and get the lowest rate on the market– up to 22% off retail. This is a special Shopify rate that is not available anywhere else.
- Merchants who are on the Shopify, Advanced, and Plus plans and use Priority Mail Cubic pricing get up to 90% off retail rates in 2020. Learn more about Cubic pricing.
- Though Priority Mail retail rates increase by an average of 4.1%, you will save up to 40.4% off retail costs this year.
- Retail rates for Priority Mail express increase by an average of 3.5%, but you will save up to 16.9% off retail when you use Shopify Shipping.
You can use the Shopify Shipping calculator to estimate the current rates you’d pay using existing USPS mail classes offered in Shopify Shipping. Once 2020 rates go into effect on Jan 26, use the calculator to see exactly how much you’ll save this year.
Effective December 29, 2019
UPS rates with Shopify Shipping will not increase while UPS retail prices will increase by an average of 4.9%. That means Shopify merchants will save even more in 2020:
- Get ecommerce discounts on domestic and international shipping, including up to 49% off UPS® Ground shipments, up to 60% off UPS 2nd Day Air® service and UPS Next Day Air ® service and up to 73% off UPS Worldwide Expedited® service on eligible packages
If you’re using Shopify Shipping, the residential fee continues to be waived for domestic UPS Ground and UPS 3 Day Select shipments and dimensional weight doesn’t apply for packages up to one cubic foot in volume for both services.
When things get busy you may need a variety of options to get packages out the door. UPS continues to expand on a wide range of pickup options and convenient drop-off locations.
- Pick up: Arrange for a UPS Driver to pick up shipments daily, weekly, or upon request to best work with your schedule and location. Learn more about UPS pick up options.
- Drop off: Drop off pre-labeled packages at any UPS Access Point location including The UPS Store®, UPS® Drop Boxes, select CVS & Michael’s stores, and other designated local businesses. Find a nearby drop off location.
Ship six days a week, including Saturdays and offer guaranteed delivery to your customers in the US and the rest of the world.
Effective January 1, 2020
In 2020, DHL Express retail prices will increase by an average of 5.9% for their DHL Express Worldwide shipping service. With Shopify Shipping, save up to 78% off retail prices for DHL Express Worldwide shipping rates, including up to 76% off shipments to Canada– the most common international shipping destination for Shopify merchants in the US.
Effective January 13, 2020
In 2020, Canada Post retail prices will increase by an average of 4% domestically and 2% to the USA and internationally. With Shopify Shipping, save up to 47% off retail prices for Canada Post shipping rates.
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 2020 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 2020, 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.