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Will Increased Shipping Costs in the U.S. Affect eCommerce Sales in 2013?

The three major shipping couriers in the United States, the US Postal Service, UPS and FedEx, are all raising their rates in 2013. How merchants will respond to these price changes and whether or not the increased shipping costs will damper online sales growth in the United States are important implications for eCommerce in 2013 and beyond.

Shipping is something all online and CNP merchants selling tangible goods must be concerned with, from auction site sellers to large enterprises. Offering various shipping options to consumers is important, and many merchants incorporate free shipping with promotions and offers to encourage higher shopping cart totals. But merchants may have to raise these thresholds for when they offer free shipping as the costs for providing this are rising in 2013. Additionally, consumers that pay for the shipping themselves may make fewer eCommerce purchases as the benefits to shopping online erode while shipping costs increase.

Many U.S. consumers are already aware that the costs of First Class stamps will be increased to 46 cents. But the USPS is also including price increases that will affect Priority and Commercial Plus mail, with all these price changes to take effect starting January 27, 2013. Overall Priority Mail costs will increase by an average of 6.3 percent, although the average price increase for Priority Mail Commercial Base online postage services will be 3.7 percent while Commercial Plus (large volume) customers will see a 3.8 percent increase.

The private shipping companies are raising their rates as well. UPS is increasing the cost of Ground services by 4.9 percent, Air and international shipping services by 4.5 percent, with a 4.9 percent increase for Next Day, 2nd Day and 3 Day freight shipping rates between the U.S., Puerto Rico and Canada. The UPS price changes took effect on the last day of 2012. Similarly, Federal Express is increasing their package and freight shipping rates by an average of 5.9 percent for U.S. export and U.S. import services while the minimum rates for FedEx Express Services as well as the rates for FedEx Retail and FedEx SmartPost will all increase. The FedEx rate increases will take effect on January 7, 2013.

eCommerce has continued to grow at healthy rates in the U.S. for several years as holiday shopping and annual total retail spending continue increase in the online channel. But as shipping costs rise, in addition to increased measures to capture sales tax for more online transactions, the value and cost savings to shopping online will diminish and consumers will respond accordingly. The eCommerce industry in the United States is strong and is still expected to grow in terms of online retail spending for 2013, but the increased shipping costs will have an effect. Merchants will need to decide how they will react to these rising costs, whether that means passing the full shipping cost on to the consumer, reducing free shipping promotions or increasing the minimum order total to become eligible for free shipping.

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