Free Shipping Wars Rage as UPS and FedEx Announce Increased Rates for 2013

By Marcy Bonebright, dealnews Senior Staff Writer

Savvy online shoppers have come to rely on free ground shipping, which often means that retailers have to eat the resulting shipping costs. Unfortunately for these vendors though, it appears as if those costs are only going to get bigger.

Recently both UPS and FedEx announced that they will charge higher rates for standard ground shipping in 2013, increasing the rates by a net average of 4.5% to 4.9%. With this hike, merchants will find it a pricier endeavor to offer free shipping with no or low-order minimums, and it's possible that the cost of delivery could be passed on to the shopper.

Both consumers and retailers alike will start to feel the pinch starting on December 31, when UPS rates will increase. The new FedEx rates then will go into effect on January 7, 2013. Many online retailers depend on these shipping companies for the lion's share of their residential deliveries, and as a result of the increase, "free shipping" is about to become a lot less free for their bottom line.

This puts many merchants in a bind: most online shoppers have come to expect free shipping. According to the Pittsburgh Tribune-Review, one Forrester survey reported that "57% of respondents said they shop more often with retailers that offer free shipping than with those that don't, and 27% said they have made unplanned purchases to meet spending thresholds to get free shipping." The days of meeting a minimum to get free shipping could be coming to an end, too, according to GlobalPost.

Larger online retailers like Amazon have come to understand the power of no-minimum free shipping. In August, the online shopping behemoth announced that it now sends more items via its Prime free 2-day shipping (which requires a flat $79 per year subscription) than through Free Super Saver Shipping (which requires a $25 minimum purchase). ShopRunner, a shipping service that partners with a variety of online retailers, also offers all-inclusive free shipping for a yearly fee. Now, according to The Economist, Google is looking into creating a similar service, or maybe even purchasing a shipping company like UPS.

Even without a service like Prime or ShopRunner, online merchants still need to offer free shipping, if only to keep up with competitors. According to a study by Internet Retailer, 64 of the top 100 largest e-retailers "offer some sort of free shipping, including tying free shipping to certain conditions such as spending a certain amount or requiring the use of a promo code." Of course, free shipping isn't really "free," since retailers end up paying for the handling and delivery, and shoppers should expect to see the increased UPS and FedEx rates affect the frequency with which orders will ship for free in 2013.

How do you feel about paying more to ship for less? Would you rather dodge shipping or pay less for a product? Or would you rather attempt to sidestep the whole issue and pay for a free shipping service like Prime or ShopRunner? Sound off in the comments below.

Front page photo credit: Etched Images

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OH GOD NO to shipping via USPS. That comment must be by a USPS employee "ELURIE"; they are in no way the cheapest or most reliable and they are the epitome of bloat, waste and inefficiency. Free shipping or low item cost is really irrelevant; its the COMBINED total net cost that matters.
But isn't USPS struggling hard? Aren't they closing down stores and employees? Sad news.
Brian Moon (DealNews)
@ELURIE Living in an "emerging community" (also known as the boonies) I see a lot of my stuff shipped to my house via USPS. Even if it ships "UPS", the last leg is delivered by the USPS. I think they have found a good revenue stream there by filling in where UPS can't afford to go.
There is one more shipping company that is the low cost leader. US Postal Service!! The largest and cheapest in the world. It is a private NO TAX DOLLAR supported company. SHIP USPS!!!