Shipping Rates 101: How Shippers Set Their Prices Each Year

Whether you’re running a small business or managing personal shipments, understanding how companies set their shipping rates can help you stay within budget and avoid surprises. Major carriers like FedEx, UPS, and DHL dominate the shipping market, and each updates their prices on an annual basis to keep up with market demands, inflation, and a variety of other factors. In this blog, we’ll explore how these carriers set their shipping rates, explain common surcharges, and share actionable tips for getting the best deals.

The Top 3 Carriers: FedEx, UPS, and DHL

Shipping connects us together across the country and the carrier you choose can have a huge impact on the quality service you receive, the care your package is shown, and the amount you pay. Outside of the United States Postal Service, FedEx, UPS, and DHL lead the pack, providing robust services that cater to a variety of shipping needs. Each of these carriers has carved out its niche, so your choice will depend on your shipping priorities, whether speed, cost, or international capabilities.

FedEx

FedEx has built a reputation for speed and reliability. If you need a package delivered overnight or within two days, FedEx Express is often the first choice. Their FedEx Ground service is also highly competitive, particularly for e-commerce businesses shipping domestically. Beyond speed, FedEx excels in technology integration, offering tracking systems and tools that make logistics simpler for customers. It’s easy to benefit from FedEx shipping rates and their customizable shipping solutions and discounts for regular users, making their services some of the best shipping for small business owners.

UPS

UPS is synonymous with consistency and scale. Its vast ground delivery network is unmatched in the U.S., making it a strong choice for domestic shipping, especially for heavier packages or deliveries to businesses. UPS also offers services tailored for international shipping, though its strength remains rooted in ground operations. Small businesses frequently rely on UPS shipping rates and their service for its ability to handle high-volume shipments and its My Choice program, which offers better control over deliveries.

DHL

While DHL doesn’t have the same domestic footprint as FedEx and UPS, it’s a global powerhouse for international shipping. DHL specializes in cross-border logistics, making it the preferred carrier for shipping most packages overseas. With a focus on express and freight shipping, DHL ensures timely delivery while navigating complex international customs processes. For small businesses shipping internationally, DHL often provides competitive pricing and tailored support for export needs.

How Shipping Rates Are Updated

If you’ve noticed your shipping costs creeping up each year, you’re not alone. Carriers routinely adjust their rates, often announcing changes during the fourth quarter, which take effect early the following year. Understanding the factors that influence these updates can help you plan your shipping budget more effectively.

• Inflation: Like any business, shipping companies face rising costs due to inflation. Labor costs, facility maintenance, and the price of goods and services increase annually, and carriers adjust their pricing to reflect these changes. Inflation-related increases are often modest but compound over time.
• Market Demand: The balance of supply and demand significantly impacts shipping rates. During periods of high demand, such as the holiday season or times of economic growth, carriers may increase prices to manage volume and optimize operations. Conversely, in a sluggish market, rates may remain stable or increase more gradually.
• Operational Costs: Fuel prices, vehicle maintenance, and investments in logistics infrastructure all factor into rate adjustments. For example, if a carrier invests heavily in new delivery vehicles or warehouse technology, those costs are often passed on to customers through higher DHL, FedEx, and UPS shipping rates.
• Service Enhancements: Carriers continuously strive to improve their service offerings, from faster delivery times to more sophisticated tracking tools. While these enhancements provide value to customers, they also come at a cost, contributing to rate increases.

To ensure transparency, most carriers publish detailed rate adjustment notices. For example, FedEx and UPS provide annual charts explaining percentage increases across different services and surcharges, helping businesses and individuals plan accordingly.

Understanding Surcharges

Surcharges are a critical component of shipping costs and often the source of unexpected fees. Carriers use surcharges to cover specific operational expenses, such as delivering to remote areas or handling oversized packages. While these fees may seem frustrating, they are designed to address challenges that standard DHL, UPS, and FedEx shipping rates don’t account for. By understanding these surcharges, you can better anticipate your total shipping costs and plan your shipments strategically.

• Fuel Surcharges: Fuel is one of the most volatile operating costs for carriers. To account for fluctuations in fuel prices, most carriers implement fuel surcharges that are adjusted regularly based on current market rates. While frustrating, this surcharge ensures carriers can maintain operations without drastic pricing changes during spikes in fuel costs.
• Residential Delivery Surcharges: Delivering to residential addresses often involves more time and resources than delivering to businesses, as routes are less dense and require longer travel distances. Residential surcharges help offset these inefficiencies.
• Delivery Area Surcharges: Shipping to rural or remote locations requires carriers to go off their primary routes, increasing time and fuel usage. Delivery area surcharges compensate for these added costs.
• Oversize or Weight Surcharges: Packages that exceed standard dimensions or weight thresholds require special handling and take up more space in delivery vehicles. These surcharges ensure carriers can accommodate oversized shipments without affecting other customers.
• Peak Season Surcharges: During high-demand periods, such as the holiday season, carriers face increased operational strain. Peak season surcharges help manage the additional costs of hiring seasonal workers and handling higher shipment volumes.

Tips for Getting the Best Shipping Rates

If you’re a small business or individual spending less than tens of thousands annually on shipping, you might feel like you lack the leverage of larger shippers. However, there are several ways to save money, maximize the value of your shipping budget, and find the best shipping for small businesses like yours.

• Compare Carriers: Rates can vary widely depending on the carrier, service level, and destination. You can use online tools like FedEx’s Rate Finder, UPS’s shipping calculator, or third-party platforms to compare costs. Don’t forget to factor in surcharges when making comparisons.
• Leverage Discounts: Most carriers offer discounted shipping rates for small businesses and frequent shippers. For example, FedEx Small Business Rewards and UPS’s Digital Access Program provide tiered discounts based on shipping volume. Signing up for these programs can lead to significant savings over time.
• Optimize Packaging: Dimensional weight (DIM) pricing means that larger packages, even if light, may cost more than smaller, heavier ones. Use appropriately sized boxes and avoid excess packaging to minimize DIM charges. Reusing boxes and packing materials can also help save on costs.
• Consolidate Shipments: Instead of shipping multiple packages to the same destination, combine items into a single shipment whenever possible. Consolidation reduces the frequency of pickups and can lower overall costs, especially when shipping in bulk.
• Ship with PostNet: Shipping with PostNet makes the process quicker and easier. Our centers are great for both individuals and small businesses and always compare prices and services in real-time to ensure you get the ideal price, delivery date, and more with each shipment.
• Ship Early & Off-Peak: Last-minute or expedited shipments typically cost more. Plan ahead to use standard shipping services and avoid peak holiday surcharges whenever possible.

Take Advantage of the Best Possible Shipping Rates with PostNet

Shipping rates can feel like a mystery, but understanding the key factors behind them—along with common surcharges—can help you take control of your costs. On your own, comparing the different carriers to get the best real-time DHL, FedEx, and UPS shipping rates can be time-consuming and take you away from other, more important priorities. Instead, leave it to PostNet. Our local centers will find the best rates for the service each of your packages for you, both domestically and abroad. Learn more about our shipping services today.