By
Counterman
When I speak with supply chain and fulfillment leaders at auto parts brands we work with, they often speak of a dichotomy shaping their businesses. On one hand, they continue to see significant growth in their e-commerce channel. On the other hand, what it costs to ship parts purchased online by everyone from repair shops to consumers is getting more and more expensive.
Recently the
link hidden, please login to view from the Auto Care Association and MEMA put the growth of e-commerce in context, with researchers predicting 5.4% compounded annual growth through 2030. As Philip Atkins, director, strategic research and planning at MEMA, noted in the corresponding
link hidden, please login to view “The percentage of consumers starting their in-store purchasing journey online has grown steadily since 2018, emphasizing the importance of an online presence and an e-commerce strategy.”
Unfortunately, this significant growth is increasingly accompanied by an equally pervasive trend – the dramatic increase in what it costs to ship parts, particularly those that are heavy for their size or bulky. Of course, hard parts are often both.
That is why parts retailers that do a lot of business online find themselves in a precarious position. For online sales with narrow margins, increases in shipping costs can quickly spell the difference between profit and loss, a reality many omnichannel and e-commerce operations increasingly encounter. An overview of the carrier landscape reviews why.
The Carrier Landscape is Changing – But Not How Those Who Sell Parts Want
As October came to a close, United Parcel Service (UPS) introduced its annual general rate increase, or GRI. As in past years, it would mirror that of its closest rival, FedEx, with published shipping rates for both carriers increasing by 5.9% in the year to come – a jump that until a few years ago would have marked a record-breaking increase in and of itself. UPS’ new rates will go into effect on Dec. 22, 2025 and FedEx’s will go live shortly thereafter on January 5, 2026.
If it feels like these annual increases are adding up, you’re right. The GRIs of FedEx and UPS – both of which have introduced identical percentage increases for years – have increased shipping costs by 27% since 2021.
Regrettably though, the bigger story – and the bigger cost increases – for those who sell parts are not the GRIs, which merely represent higher published shipping rates. The greater impact on shipping costs instead can be found in the unprecedented steps carriers have taken to generate additional revenue with accessorial charges.
Accessorial charges, those that occur off of the rate card, have emerged to be the preferred lever for carriers to increase their revenue-per-package, or RPP. And importantly, these charges are increasingly focused on ensuring that customers which ship items carriers no longer want in their networks pay a premium to do so. In very real terms, carriers are showing us what their preferences are with plain, overt economics.
Items that are heavy for their size or oversized, hard parts being a great example, are a prime example. Consider the following surcharge and accessorial increases we’ve seen since 2021, all of which dwarf the cumulative impact of the GRI, 27%, over that same time.
Oversize items: UPS (108% increase) and FedEx (116% increase);
Additional handling weight: UPS (88% increase) and FedEx (93% increase); and
Delivery Area Surcharge, or DAS: UPS (35% increase) and FedEx (36% increase)
Notably, these are but three significant accessorial surcharges parts retailers face. Carriers are also using definitional changes to their advantage. For example, DAS were historically limited to remote areas, but over the past couple of years have evolved to encompass zip codes found in some of the largest metropolitan areas and most popular parcel shipping destinations.
Perhaps most importantly, carriers are increasingly implementing new or altered accessorial charges with little or no warning, a reality that can dramatically impact the economics of any shipment. What then, can parts retailers and distributors do to address these realities? More specifically, how can they keep their costs in check?
Take These Five Steps to Control Escalating Parcel Shipping Costs
Parcel shipping costs have always been among the least transparent and most problematic for spend management and financial governance because each shipment is in effect an ad hoc event shaped by many, constantly changing variables. Platforms that feature advanced data science and AI now enable businesses to see and understand in real-time how carriers’ changes will impact their unique shipping profile and costs, as well as what actions they can take to counter them.
Even so, an effective parcel shipping program includes many strategies and tactics, all of which should be fine-tuned to the unique needs of the business. Several foundational steps and points are; however, broadly applicable. Five of these include:
Make parcel shipping a priority across the business: Cultural change is crucially important. In businesses that sell online or that depend on the fast movement of supplies, parcel shipping acumen and performance should be considered a crucial driver of profitability and a core focus of any fulfillment, warehouse or distribution center operation. Operations, finance, marketing and the shipping organization should be in a constant dialogue to discuss everything from accruals, to product pricing strategies – a key step to identify opportunities when discounted or the always misleading “free” shipping can be offered to increase online sales – as well as how parcel shipping data can inform operational imperatives like the location of new stores.
Understand the accessorial landscape: The rapid changes we have seen in how carriers approach accessorial charges and work to increase RPP require shippers and the companies they serve to be proactive. Today, the reactive approach to shipping in which costs are fully understood only after the analysis of carriers’ invoices is both dangerous and insufficient. When the rules that govern shipping costs can change at any moment, real-time shipping intelligence and the ability to immediately act on it before assuming new costs is imperative.
Gain SKU-level visibility: Historically parcel shipping outlays were viewed in the aggregate. As long as the shipping budget was roughly adhered to, most organizations called it good; however, aggregate results often hide costly mistakes. More than a few retailers have discovered long-after the fact that they shipped entire product lines at a loss because a particular package or the weight of an item triggered a significant surcharge. SKU-level intelligence is crucial to identify these items. Often this intelligence reveals that some products should only be sold for pickup at the store.
Audit shipping processes and negotiate year round: Even a basic audit of parcel shipping programs will uncover savings of 1-2% of total parcel shipping spend, but they are often much higher. For example, more than 75% of businesses do not hold carriers responsible when they fail to meet their own service-level guarantees, typically because parcels were damaged or delivered late. Failing to file for these refunds is literally leaving money on the table. Regular negotiations with the carrier and proactive efforts to secure exceptions and better terms and conditions should also occur year round. Simply negotiating the GRIs is no longer sufficient.
Consider a multi-carrier strategy: A multi-carrier should also be considered – something we found that 90% of shippers plan to do in our “
link hidden, please login to view” conducted earlier this year. A multi-carrier strategy inherently enables parts retailers to gain greater flexibility by matching the right package with the right carrier, as well as more negotiating strength, but it also introduces additional complexities. For example, negotiated volume tiers must be closely monitored.
By considering these factors, parts retailers can effectively act on the significant opportunities to engage consumers in online sales we are now seeing while keeping fulfillment costs under control. It is an endeavor proactive parcel shippers are ideally qualified to achieve.
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