UPS Inc. said it will raise rates by 5.9%, effective Dec. 26, on its SurePost product, in which UPS inducts parcels deep into the U.S. Postal Service network for final-mile postal deliveries to residences nationwide.
According to information posted Wednesday on the company’s (NYSE: UPS) website, UPS will impose a 5.9% increase, on average, on deliveries of parcels weighing between 1 and 9 pounds. Delivery rates on parcels weighing between 1 and 5 pounds, which represents much of the e-commerce delivery universe, will increase by an average of 6.2% and will go up to 6.5% depending on the delivery destination zone, UPS said.
UPS operates across seven delivery zones within the lower 48 states. The zones are enumerated as 2 through 8. Goods shipped to zone 2 typically have lower rates because of the short lengths of haul. Conversely, higher rates are generally imposed on shipments to zones 6 to 8 because of the longer distances involved.
Under the rate matrix published on the website, rates on parcels weighing 6 to 9 pounds will, for the most part, be less than their lower-weighted counterparts, regardless of the delivery zones.
In addition, UPS will raise most of its existing delivery surcharges on the SurePost traffic, according to Nate Skiver, founder of consultancy LPF Spend Management. So-called delivery-area surcharges, which apply to less densely populated areas where the company’s cost to serve is higher, will rise to $3.40 per piece from $2.35, a 44.7% hike, Skiver said. UPS’ “extended” delivery-area surcharges, which apply to deliveries to even more remote and less-populous areas, will increase 39% to $4.10 per piece from $2.95, Skiver said.
A $12 per piece “remote-area surcharge” that UPS announced in November will not apply to SurePost traffic, Skiver said.
The rate increases don’t end there, however. UPS and other carriers will be hit by a postal rate increase effective Jan. 9. Those increases are typically passed on to the carriers’ customers, according to Skiver.
UPS remains an active user of the Postal Service’s last-mile delivery network, though perhaps not as heavily as in the past. Rival FedEx Corp. (NYSE:FDX) has taken all of its once-sizable postal business in-house to be run over its own network. Amazon.com Inc. (NASDAQ: AMZN), historically a massive user of the Postal Service, has dramatically curtailed its delivery relationship in favor of moving its deliveries shipments in-house.
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