How To Prepare for Shipping Rate Changes

Every year, carriers like USPS, UPS, DHL Express and Canada Post evaluate their services and prices to adjust for the upcoming year. Here’s an overview of what’s changing for each carrier in 2021—and what you can do to prepare.

It’s important to keep an eye on the costs of running your business, especially as they change. With the new year coming up, you can expect some changes to your shipping costs, which may factor into both your shipping strategy and pricing strategy for 2022.

Every year, shipping carriers review their pricing and make adjustments to their rates due to increased costs like fuel and labor. These updates are normally implemented every year in January, so now’s the time to prepare for upcoming rate changes.

Here’s an overview of the rate increases coming in 2022 to help you optimize your shipping and fulfillment strategy in light of these changes. 

Upcoming rate changes

All of the carriers supported by Shopify Shipping are set to change retail rates in 2022. Here’s an overview of the expected changes for USPS, UPS, and DHL Express in the US, and Canada Post in Canada and how much you’ll save off retail costs when you ship with Shopify. Changes in Australia are not expected in January but may happen later in the year.

If you’re shipping via Shopify Shipping, remember that you get access to negotiated rates with each carrier—so while you may see an increase in your shipping rates, you’ll still get lower rates on Shopify than you would at retail counters.

USPS

Effective January 9, 2022

Shopify continues to offer some of the lowest USPS rates available anywhere through Shopify Shipping, including up to 67% off retail rates for First Class Package Service.

• Retail rates for First Class Package Service will increase by $0.50 for packages weighing 1–4 ounces, $0.30 for packages weighing 5–12 ounces, and $0.80–$1.70 for packages over 12 oz. You save up to 67% off retail rates when you ship using Shopify Shipping. 
• Retail rates for Priority Mail Express will increase by 3.1% overall, but you save up to 16% off retail rates when you ship using Shopify Shipping. 
• Merchants who are on the Shopify, Advanced, and Plus plans continue to benefit from Priority Mail Cubic pricing— up to 88% off retail rates in 2022. Learn more about cubic pricing and its availability to merchants on the Basic plan. 

You can use the Shopify Shipping calculator to estimate the current rates you would pay using existing USPS mail classes offered in Shopify Shipping. Once 2022 rates go into effect on January 9, use the calculator to see exactly how much you’ll save this year.

UPS

Effective December 26, 2021

UPS published rates will increase by an average of 5.9%, but the UPS rates available through Shopify Shipping are not changing. That means you get up to 86% off when you ship using UPS negotiated rates with Shopify Shipping:

• Get ecommerce discounts on domestic and international shipping, including up to 55% off UPS® Ground shipments, up to 69% off UPS 2nd Day Air® service and UPS Next Day Air® service, and up to 86% off UPS Worldwide Expedited® service on eligible packages.
• While UPS base rates are not changing for Shopify Shipping, there are some service and surcharge changes that will affect UPS rates:
• UPS is making changes to the costs for value-added services and other charges. Some of these will be discounted or not applicable for Shopify Shipping merchants.

Effective January 9, 2022

• The ZIP codes for which area surcharges apply will change. These include Delivery Area Surcharge, Extended Area Surcharge, and Remote Area Surcharge. See the full list of applicable ZIP codes.

When things get busy you may need a variety of options to get packages out the door. UPS continues to expand on a wide range of pickup options and convenient drop-off locations and had the highest on-time performance in the industry last year.

• Pickup: Schedule a discounted pickup directly through your Shopify admin or contact customer support and let us help you arrange for a UPS driver to pick up shipments daily, weekly, or upon request to best work with your schedule and location. Learn more about UPS pick up options.
• Drop off: Drop off pre-labeled packages at any UPS Access Point location, including The UPS Store®, UPS® Drop Boxes, select CVS and Michael’s stores, and other designated local businesses. Find a nearby drop off location.

DHL Express

Effective January 1, 2022

In 2022, DHL Express retail rates will increase by an average of 5.9% for DHL Express Worldwide shipping service. With Shopify Shipping, save up to 76% off retail rates for DHL Express Worldwide shipping and get free package pickups. Check your rates using the Shopify Shipping calculator. Once the 2022 rates go into effect on January 1, use the calculator to see exactly how much you’ll save this year.

Canada Post

Effective January 10, 2022

In 2022, Canada Post rates will increase by an average of 3.5% domestically and 2.8% to the US and internationally. With Shopify Shipping, save up to 58% off retail rates for Canada Post shipping rates.

How to optimize your shipping strategy

The options available to adjust to the rate changes depend largely on what your current shipping strategy uses for pricing: free, flat-rate, or calculated shipping rates. Based on which one you’re currently using, you’ll have different courses of action you can take to adjust them.

1. Free shipping

Photo courtesy of: Unsplash

If you offer free shipping, here are some of the options available:

• Do nothing. If you continue offering free shipping, you’ll need to absorb the increased cost of ecommerce shipping once the rate changes take effect. Before moving forward, make sure you’re aware of your margins, and that you’ll remain profitable in the face of the increased costs.
• Increase product prices. If you increase your products’ prices to cover the increased cost of shipping, you’ll keep your margins the same. However, repeat customers may notice an increase in price, which could in turn impact purchase frequency.
• Switch to free shipping minimums. A good compromise between doing nothing and increasing product prices is to add a free shipping minimum. This is an effective tactic to increase your average order value, which can help offset the increased cost of shipping, and pass on the cost of shipping to your customers if their order falls below the threshold.

2. Flat rate shipping

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If you offer flat rate shipping, here are some of the options available:

• Do nothing. If you continue offering flat rate shipping, you’ll need to be prepared to absorb the increased cost of shipping when the rate changes take effect. Make sure to check the impact this will have on your profit margins, and ensure it’s sustainable.
• Introduce or adjust your order value ranges. Your flat rates don’t need to be the same for every order. Instead, you can begin to offer a higher flat rate on small orders, and lower flat rates as cart sizes increase to help offset your increased shipping costs. If you’re already offering varying flat rates for shipping, you can adjust the ranges to account for the increased cost of shipping.
• Increase product prices. If you keep your flat rate shipping price the same and increase your product prices, you can maintain your current margins. However, repeat customers may notice the increase in price, which could lead to more time in between repeat purchases, or potentially a lower conversion rate.
• Increase your flat rate shipping price. Increasing the cost of shipping may lead to similar results as increasing your product prices, although you will likely see the impact in your abandoned cart rates. Shipping costs are one of the most common reasons for customers to abandon their carts, so to mitigate the impact you could implement or adjust your cart recovery emails.

3. Calculated shipping

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If you offer calculated shipping, there are a few options that you could implement:

• Do nothing. If you do nothing and you use a calculated rates provider or app, the shipping rates displayed at checkout will automatically update to the 2022 rates. It’s important to keep in mind that shipping costs are one of the biggest factors leading to abandoned carts, so you may see a higher cart abandonment rate as shipping costs increase. If you’re using Shopify Shipping, you’ll see that your discounted shipping rates will still get passed on to the customer.
• Decrease your product price. Since your shipping rates will update automatically, you could decrease your product price to keep costs the same for your customers. If you’re considering this, it’s important to ensure that your margins are still sustainable given your new pricing strategy and that your pricing remains strategic for the rest of your business. For example, if you offer a premium product, you’ll want to ensure your prices still communicate the right message about your product’s quality.

Review your shipping strategy and adjust accordingly

While your existing shipping strategy can be adjusted to account for the rate changes taking effect in 2022, this may also present an opportunity to rethink your shipping strategy from the ground up.

If none of the modifications fit with your pricing strategy, your margins, and your ideal conversion rates, it may be time to consider testing a new strategy—from free to flat rate shipping, or from calculated to flat rate—or moving to a service like Shopify Shipping that can offer you discounts off of the retail prices.

Illustration by Luca D'Urbino