Ina Steiner EcommerceBytes Blog
News and insight focusing on ecommerce.
by Ina Steiner, Editor of EcommerceBytes.com
Wed Aug 24 2016 23:23:18

Small Shippers Punished by Shipping Duopoly Pricing?

By: Ina Steiner

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A new article refers to FedEx and UPS as a "near duopoly" (same concept as a monopoly but with two companies rather than one) and says they have used their market power to move in virtual lockstep when setting published rates for ground shipping.

Mark B. Solomon, executive news editor of DC VELOCITY, points to data that seems to prove that supposition: "Over the past 10 years, the average cumulative list rate increases on the two companies' ground delivery services have been identical across the board."

The data was compiled by consultancy Supply Chain Optimizers and obtained by DC Velocity.

Here's the clincher for online sellers:

"The ground-delivery price increases do not affect the many FedEx and UPS shippers who tender parcels under contracts with their providers. Rather, the increases, combined with recent moves by both companies to base all ground parcel pricing on a shipment's dimensions rather than its weight, tend to "punish small shippers who aren't covered by contracts, and have applied no science to their packaging," Ampuja said." 
(referring to Jack T. Ampuja, Supply Chain Optimizers' president)

Be sure and read the article and let us know what you think. 

It won't be long before the two companies announce their annual rate hikes that go into effect each January.




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Perminate Link for Small Shippers Punished by Shipping Duopoly Pricing?   Small Shippers Punished by Shipping Duopoly Pricing?

This user has validated their user name. by: RKTOYS

Thu Aug 25 11:27:53 2016

If you think it's bad now, wait until they finally manage to destroy the USPS.

Perminate Link for Small Shippers Punished by Shipping Duopoly Pricing?   Small Shippers Punished by Shipping Duopoly Pricing?

by: FeelingFroggy This user has validated their user name.

Thu Aug 25 13:06:58 2016

Whats really sad about the whole thing is that we ship 100s and 100s of packages weekly by FedEx or UPS and when you check the tracking 85% of them are delivered by the USPS.

It would seem that if anyone at the USPS was awake they would notice this. If they would just lower their rates a tad below or the same as fedex and ups I would be shipping all these packages by them and they would get the money, But no they gratefully accept the pittance that fedex and ups offers and delivers the package.

How stupid it that.

Perminate Link for Small Shippers Punished by Shipping Duopoly Pricing?   Small Shippers Punished by Shipping Duopoly Pricing?

by: Scotty This user has validated their user name.

Thu Aug 25 15:43:24 2016

Unions....have to keep all those 600,000 employees working.

Perminate Link for Small Shippers Punished by Shipping Duopoly Pricing?   Small Shippers Punished by Shipping Duopoly Pricing?

by: FeelingFroggy This user has validated their user name.

Thu Aug 25 16:07:35 2016

I understand feeding the union coffers but it makes more sense to handling the package from origination to destination for a rate than to just get the pittance that fedex and ups give them to get the package the last 3 miles. I'm sure the unions for fedex and ups aren't to happy with the lost.

I for one am not happy when I pay them to deliver a package that they pawn it off to some post office. Creates a delay in delivery for one.

Perminate Link for Small Shippers Punished by Shipping Duopoly Pricing?   Small Shippers Punished by Shipping Duopoly Pricing?

by: pace306 This user has validated their user name.

Thu Aug 25 16:10:42 2016

Froggy - its the "last mile" thats most expensive, so Fed Ex and UPS hand off their items to USPS who by law HAS to deliver to every address.

If you ship 100 items per day (or something) then you can use this service - its called Smart Post.

USPS seems to be ok with it as it increases their over all volume which is important to them.

But to answer Ina's question - YES.

Both companies raise rates like clockwork - even when fuel prices go DOWN.

"Funny" how the pricing is almost IDENTICAL ... "accidentally on purpose" Im sure!

Perminate Link for Small Shippers Punished by Shipping Duopoly Pricing?   Small Shippers Punished by Shipping Duopoly Pricing?

by: Scotty This user has validated their user name.

Thu Aug 25 17:38:38 2016

@Pace....is exactly correct with the ''last mile'' effect.  UPS and Fedex know this is the most expensive aspect in their business model....so why not hand it off the the USPS where is does not matter if they lose money in the deal.  USPS should charge UPS and Fedex appropriately to deliver this last aspect....or let them do it themselves....then watch how the price changes.  USPS is subsidizing this cost by taking a loss-leader in their contracts with UPS and Fedex for this last-mile service.  Not too bright negotiation-wise from mgmt of USPS.

Perminate Link for Small Shippers Punished by Shipping Duopoly Pricing?   Small Shippers Punished by Shipping Duopoly Pricing?

by: FeelingFroggy This user has validated their user name.

Thu Aug 25 17:48:30 2016

@Scotty

Gesh someone who understands how it works. The post office subsidizes everyone. To bad they can't find a way to subsidize the small seller.

@Pace306 We use Smart Post but have found that unlike priority mail its not so smart.

Perminate Link for Small Shippers Punished by Shipping Duopoly Pricing?   Small Shippers Punished by Shipping Duopoly Pricing?

This user has validated their user name. by: Ming the Merciless

Thu Aug 25 19:03:16 2016

At one time, the government would actually sue for anti competitive, monopolistic business practices.

Today, many large corporations get away with doing anything they please and have for decades because they have no fear that the federal government will actually enforce laws.

Perminate Link for Small Shippers Punished by Shipping Duopoly Pricing?   Small Shippers Punished by Shipping Duopoly Pricing?

This user has validated their user name. by: The End

Thu Aug 25 19:49:45 2016

Nobody I know uses UPS anymore.

Perminate Link for Small Shippers Punished by Shipping Duopoly Pricing?   Small Shippers Punished by Shipping Duopoly Pricing?

by: mcposty This user has validated their user name.

Thu Aug 25 23:22:55 2016

They are criminals.

They give large sellers insane discounts while raping small sellers. Ill never use them.

Perminate Link for Small Shippers Punished by Shipping Duopoly Pricing?   Small Shippers Punished by Shipping Duopoly Pricing?

by: BB2 This user has validated their user name.

Fri Aug 26 01:07:36 2016

This year has been the worst in terms of shipping costs. Dimensional pricing is critical for the larger products I offer. In some cases, I had to dramatically adjust pricing, consider a lower margin, or drop products altogether because I was no longer competitive.

For example, one wall mirror I used to offer cost $52 to ship between coasts in 2015 via FedEx. After January, my cost to ship that same mirror to the same zip code increased to $116.

Many larger sellers negotiated same or slightly increased contracts with shippers. The benefit of volume. I didn't have that luxury. In fact, I was already paying more for shipping in 2015 than they were.

So, let's say a seller's cost in 2015 was $35 to ship the mirror between coasts. They negotiated a $0 rate increase for 2016 with their carrier. That means, they are now paying $35 for shipping, compared to my cost of $116. FedEx just priced me out of the market for that item.

The author was absolutely correct. The small business owner is carrying the burden of carrier rate increases.

I have been exploring other options this year, including a complete re-tooling of the product mix, because of this issue.

Perminate Link for Small Shippers Punished by Shipping Duopoly Pricing?   Small Shippers Punished by Shipping Duopoly Pricing?

by: Beth This user has validated their user name.

Fri Aug 26 06:10:21 2016

The lock step price increases go back further than 10 years.  From 2000 to 2005 I worked some where where I was supposed to hammer Fedex and UPS regularly for cheaper rates and I did successfully. Then my boss would come in and  hammer some more and reduce them even more.  

So anyone, like Froggy who says he's shipping hundreds a week, should be hammering them too.

And frankly I don't trust either one of them with my fragile items.  They have both damaged things and declined to pay even their automatic $100 insurance.  NEVER again will they do that to me.

USPS is still the least expensive over all and I can insure it reasonable with my 3P insurance so ... there I am until I actually see a better deal .

And NO Smartpost is not better. Cheaper maybe but just wait til you have a damage claim.  

Perminate Link for Small Shippers Punished by Shipping Duopoly Pricing?   Small Shippers Punished by Shipping Duopoly Pricing?

by: Shilpi Roy This user has validated their user name.
Web Site

Fri Aug 26 09:07:45 2016

In whatever case, only small scale sellers are punished by the increased rates. The solution is also similar from these companies when package is damaged. When compared to them, its preferable to use USPS.

Perminate Link for Small Shippers Punished by Shipping Duopoly Pricing?   Small Shippers Punished by Shipping Duopoly Pricing?

by: jeanne*gene This user has validated their user name.

Mon Aug 29 20:17:34 2016

I often wonder why eBay does not pass on lower FedEx rates to us (answer later in this post).  The large corporations get great discounts from FedEx. An over the counter rate of $66 (ground) costs a large company only $19 (more than a 70% discount). Ebay must have a similar deal with FedEx, but they only pass us maybe a 10-15% discount.  This is a great profit center for eBay



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