UPS Announces Astonishing SurePost Rate Increases for 2025

UPS SurePost is a hybrid delivery service that integrates UPS’s network with USPS’s extended final-mile reach and capabilities. It’s a partnership between two competitors playing to each of their strengths to achieve greater cost efficiency, and it’s set to undergo notable changes in 2025. In particular, the primary benefit of SurePost, the lower cost of getting packages into the hands of their intended recipients, will see a substantial rate hike and service modifications in 2025, marking a profound shift in what ecommerce shippers have come to expect from the service. Understanding these developments is crucial for merchants to adapt their operations and optimize margins next year.

Key Changes to UPS SurePost Rates in 2025

Starting January 13, 2025, packages weighing 1 to 9 pounds will see a 9.9% price increase, while those weighing 10 to 70 pounds will increase 5.9 to 7.1%. Additionally, surcharges for deliveries to less densely populated areas will increase dramatically. The Delivery Area Surcharge (DAS) will rise 61.8% to $6.15, and the Extended Delivery Area Surcharge will climb a whopping 69.4% to $8.30. These changes reflect the broader trend of rising costs of last-mile delivery services.

In addition to these changes, the U.S. Postal Service will discontinue the allowance of dual shipping labels starting January 1, 2025, as it looks to increase its network’s efficiency and gain more direct customers for USPS Ground Advantage Services, which has a faster delivery SLA than SurePost by ~2 days on average. This will limit UPS’s package routing flexibility which currently allows them to decide which agency will deliver the package to the doorstep much later in the sortation workflow. Now, shippers must use labels that indicate the responsible final mile delivery agent when the package is accepted for processing.

Comparisons Across National Carriers

UPS’s SurePost fee changes align with what we see in the broader shipping industry. USPS will increase rates for its Parcel Select service by an average of 9.2%, depending on where the package enters the postal network, while its Ground Advantage service will rise by 3.2% for commercial accounts. FedEx is implementing various surcharges and rate adjustments, including a new $1.50 inbound processing fee, expanded fuel surcharges to include address correction and dangerous goods, and implementing their own DAS price increases. So, although UPS’s SurePost increases are significant, they reflect all the national carriers’ efforts to address rising operational costs and align pricing with market demands.

Implications for E-commerce Merchants

All shipping rate hikes pose challenges for e-commerce businesses, particularly those with razor-thin margins that rely on lower-cost carrier services to operate profitably. In many cases, the increased shipping costs trickle down to the consumer through higher pricing because online retailers cannot shoulder the entire burden. We may eventually observe altered consumer spending behavior, forcing Sellers to find new opportunities to reduce costs and return the business to healthy and sustainable margins.

Strategic Adjustments for Merchants

Several strategies could be employed to help reduce shipping costs:

  1. Shipping Cost Analysis and Carrier Negotiations: Conduct a detailed shipping cost analysis to identify order distribution across the product catalog and which SKUs, customers, regions, channels, etc., will contribute to increased cost. Use the data to adjust the carrier/service mix, matching delivery date promises with carrier/service SLAs and pricing. Identify opportunities to negotiate carrier contracts to reduce shipping costs in other areas, such as different package sizes, weights, variances, zones, and alternative delivery services, to minimize the impact of the new rate changes (or explore alternative carriers and services in particular, regional carriers that are trying to compete with the large national carriers to gain market share).

  2. Shipping Optimization: Leverage technologies such as next-generation shipping label software for AI-assisted rate shipping, automatically creating optimal shipping labels and optimizing fulfillment across inventory locations (in and out of the ‘network’).

  3. Free Shipping Adjustments: Retailers offering free shipping may either need to raise minimum order thresholds to balance customer expectations with the new financial realities or, as mentioned above, intelligently merge the new overall expected transportation cost into the complete product catalog pricing to minimize or offset the financial burden.

  4. Packaging Optimization: Review packaging (boxes, mailers) and void fill (air cushions, paper) pricing and optimize for smaller packages and less void fill where possible. Also, shift to less expensive padded mailers. Use intelligent cartonization software to pack shipments efficiently to reduce carrier shipping costs and packaging waste. Negotiate with packaging suppliers and consider taking larger deliveries less frequently or pre-buying supplies to take advantage of volume/commitment discounts.

Summary

As carriers adjust to ever-rising costs by updating their fee structures and passing costs on to their customers, e-commerce brands and retailers must also determine how to manage the rising costs by cutting elsewhere or passing all or part of the costs further to their customers.

The last-mile delivery space is continuously evolving as new solutions are brought to market and innovations applied to existing technologies and services continue to mature. There are a dozen prominent regional carriers that could help reduce shipping costs for some percentage of shipments. Or, consider partnering with fulfillment experts to distribute the high-volume inventory and capture meaningful margin savings by shipping orders from warehouses closer to the customer.

In any case, one thing is clear…costs continue to rise year after year, and the solution isn’t one-dimensional. To stay competitive and grow a successful online commerce business, there needs to be a fundamental shift in how e-commerce order fulfillment and reverse logistics are managed.

Offer 1-day and 2-day shipping at ground rates or less.

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