Jan
25
2011

UPS and FedEx Rates Increases Hit Small Businesses

Raising rates is inevitable when a company is trying to increase profits and shareholder value. When companies like UPS and FedEx raise their rates on their shipping services, there are many understandable factors they take into consideration besides their stock prices. Inflation, increased fuel costs, increased competition, and increased general overhead all play a part. We understand these reasons and pay for the raise in service fees.

However, when ancillary service charges are raised it is not so understandable. Mainly: Declared value coverage (often called shipping insurance). This additional service fee from UPS and FedEx is not due to increases in lost or damages packages in their systems. It is due to the need on increasing their bottom lines. The problem is, this increase also hits the bottom line of small to medium size businesses.

In 2011, UPS and FedEx raised their declared value fees by 7%. They now charge $0.75 per $100 of coverage, with a $2.25 minimum. 7% may seem reasonable, but that is only part of the story. Did you know that since 2004, this fee has gone up 215%!

Year

UPS & FedEx Rate*

% Increase

2004 $0.35
2005 $0.40 14%
2006 $0.50 25%
2007 $0.55 10%
2008 $0.60 9%
2009 $0.65 8%
2010 $0.70 7.5%
2011 $0.75 7%

Total Increase:

214%

*Rate for $100.00 of coverage, per package.

If your business is shipping packages on a regular basis, this increase can definitely hurt your bottom line. A $5,000 spend in 2004 is now $10,700. Many businesses we speak to do not even know that the rates are this high. Many believe they are still paying $0.35!

This is another reason why Shipsurance is a great option for your business. While you continue to rely on UPS and FedEx for their core business (shipping) you can rely on us for our core business (shipping insurance). Our rates have not risen and our claims processing has gotten more efficient over time. Can UPS and FedEx say that?

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