E-commerce businesses utilizing United Parcel Service (UPS) SurePost for cost-effective deliveries should prepare for increased shipping expenses in the new year. Effective January 13th, UPS will implement rate and delivery area surcharge increases for its SurePost service, as officially announced on the UPS website.
These adjustments will see rates climb variably depending on package weight and shipping zone distance. For example, shipping a lightweight one-pound parcel to Zone 2 will experience a base rate jump of nearly 10%. Heavier packages, such as a 25-pound shipment to Zone 8, will see a rate increase of approximately 6.7%. Notably, these increases surpass the 5.9% rate hike applied to similar shipping categories last year.
SurePost remains a popular option for e-commerce shippers seeking economical delivery solutions for non-urgent, lightweight residential shipments. The demand for SurePost has been a significant driver in UPS’s ground residential volume growth, contributing to a substantial 15.4% year-over-year increase in the third quarter, as highlighted in the company’s recent quarterly report.
The mechanics of UPS SurePost involve UPS either completing the final delivery or transferring packages to the U.S. Postal Service (USPS) for last-mile delivery. In the latter scenario, packages are handed off at local USPS facilities, known as delivery units, situated closest to the recipient’s address.
However, this practice of utilizing USPS delivery units for final-mile service is becoming more costly. The USPS is set to eliminate contracted rate discounts for delivery unit entry and plans to raise rates for Parcel Select shipments entering these facilities by 10.3% next year. This strategic shift by the Postal Service aims to encourage shipping partners to inject their packages further upstream into the USPS network. The objective is to optimize the utilization of the entire USPS network and promote the growth of its end-to-end Ground Advantage delivery service.
While UPS has not explicitly detailed its strategy for navigating these USPS changes, Matt Guffey, UPS EVP and Chief Commercial and Strategy Officer, indicated in a recent earnings call that the company is actively working to reach a “mutually agreeable agreement” with the USPS.
Regardless of the specifics of this agreement, UPS is already positioning itself to reduce its reliance on the USPS for SurePost deliveries in the long term. The current contract agreement between UPS and the Teamsters union outlines a gradual increase in the proportion of SurePost volume delivered by UPS-employed drivers. This shift aims to reach 50% of SurePost volume being handled by UPS drivers by the contract year ending August 1, 2028.
Furthermore, UPS has enhanced its “proximity matching algorithm,” which enables the company to redirect a greater number of SurePost packages into its own delivery network. This improvement, as reported in their Q3 report, contributes to reduced delivery costs and partially offsets the increased third-party delivery expenses associated with the rising SurePost volume. E-commerce businesses should analyze these changes to United Parcel Service Surepost rates and consider their shipping strategies for 2025.
