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FedEx, UPS rate rises are making online shopping more expensive
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Shipping rates are going up faster than they have in nearly a decade, increasing pressure on merchants to raise prices or find other ways to offset higher costs.
FedEx Corp. on Monday said shipping rates would go up an average of 5.9% next year across most of its services, the first time in eight years that it or rival United Parcel Service Inc. has strayed above annual increases of 4.9%.
UPS is expected to release its rate increase for 2022 in the coming weeks. The two carriers have moved in lockstep with their annual price increases since at least 2010, according to Transportation Insight LLC, a supply-chain management and logistics firm.
The move away from a 4.9% annual increase shows how the pricing power has shifted to carriers like FedEx, UPS, and the U.S. Postal Service, which have seen demand for their shipping capacity and home delivery soar during the pandemic. The higher-than-normal rate hike also is a sign of inflation reverberating across the global supply chain.
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"The carriers are incredibly bullish and confident that they are holding all the cards and that they have the leverage to squeeze more margin out of their customers than ever before," said Trevor Outman, co-chief executive of Shipware LLC, a shipping consulting firm.
FedEx and UPS had dropped hints to shippers that the annual rate increase would be higher than before. Previously, some shippers would negotiate clauses into contracts that their annual rate increase would come in around 2.5% to 3%, half of the public rates. In recent weeks some large shippers have received contract renewals that would cap their annual increase at 5%, according to shipping consultants.