Everything under the sun seems to be getting more and more expensive these days, and shipping services are no exception.
So, f you’ve noticed that UPS in particular is getting more expensive, you’re not alone- so why are UPS’ prices so high? If you’d like to find out, keep reading!
Why Is UPS So Expensive In 2023?
1. The Pandemic
It’s no surprise that the COVID-19 pandemic is topping yet another list of reasons why things in the world have changed.
Nevertheless, the pandemic has played a particularly large role in why UPS’ prices have been on the rise.
As COVID-19 spread rapidly, much of the world had to stay home to try and stop the spread of this deadly virus.
Because of that, companies like UPS saw a massive leap in business, with residential deliveries increasing a whopping 65% and the average daily volume of packages increasing by 23%.
According to a spokesperson from UPS, some of the price increases from UPS have been applied in order to “reflect current market conditions caused by the pandemic.”
The price increases are also intended to help UPS stay afloat in terms of labor amidst this surge in demand, which you can read more about below.
2. Labor Shortage
As the COVID-19 pandemic raged, another issue arose: a labor shortage.
This labor shortage was mostly due to the inequities that became apparent in the job market, surrounding previously considered “menial” jobs, such as working in warehouses.
The rhetoric surrounding these jobs quickly went from “menial” to “essential.”
This led to a pseudo social movement that began in an effort to keep workers in underappreciated, underpaid jobs. However, the damage had been done.
UPS relies on employees taking positions in warehouses or transportation in order to keep the company going.
While UPS has had a relatively positive history in taking care of its workers, people willing to work these positions are harder and harder to come by.
Because of the labor shortage, UPS has resorted to raising the wages of current essential workers in order to retain them.
This is especially true in light of increased demand, as well as offering higher pay to entice new employees into joining the company.
These wage raises have, in turn, been reflected in the prices of UPS services, as the company tries to maintain a healthy profit margin.
3. UPS Relies on the Market Price of Fuel to Calculate Shipping Costs
UPS is, above all else, a shipping company, and a shipping company can’t ship packages without transportation.
UPS takes the transportation facet of its business very seriously, and adjusts the retail price of shipping, depending on how much fuel costs.
This is a critical business maneuver that allows UPS to continue to offer the range of services that are currently available.
UPS has a fleet of over 100,000 trucks, and nearly 300 private aircraft, all of which are constantly making trips around the world, and those trips require gas/fuel.
With the price of fuel at record-breaking highs, due to a variety of issues, UPS and other shipping companies are having to raise their prices to help maintain profit margins.
4. Increased Delivery Surcharges
This article for the Wall Street Journal also indicates that a hike in delivery surcharges could be to blame for the ever-rising cost of shipping.
There is an increased volume of packages that UPS and other companies such as FedEx are dealing with.
Therefore, UPS is estimating surcharges of anywhere between $1 and $4, depending on the shipping service used.
These fees are intended for large-volume shippers, WSJ reports, such as companies shipping 25,000 packages a week, or more.
While UPS may not be charging these new surcharges directly to customers, the company will likely be reflected in the prices charged by retailers, as well as in other UPS fees.
5. All Packages Are Insured to a Certain Dollar Amount
Another reason that UPS can be pricier than other shipping companies is because of the automatically included features, namely package insurance.
All UPS packages are automatically insured for up to $100.
This means that if you’re shipping something worth $100 to a friend, and the package gets lost or damaged, UPS automatically reimburses you that $100.
If your package is worth $200, and is damaged or lost, UPS will still reimburse you the $100 automatic insurance.
However, you will only be reimbused for the rest of the item’s value if you’ve taken advantage of the company’s declared value program.
Not every shipping company does this, as it puts an additional strain on the company, not only to have cash set aside for reimbursements, but also to have staff and resources to investigate claims.
This additional strain then tends to result in higher overall prices so that UPS has the funds and resources necessary to be able to uphold its end of this customer promise.
6. You Live in or Are Shipping to a Residential Area
Last mile delivery is notorious for being the absolute worst part of being in the shipping industry.
Last mile delivery is the part of the delivery process that entails putting the package in the hands of the customer, and is the most expensive and tedious bit of shipping.
In fact, it eats up an estimated 53% of the total cost of shipping.
To help combat this logistics issue, UPS, along with many other companies have begun charging residential fees, or residential surcharges.
This means that if you’re shipping to an address that is a home or apartment, you can expect to pay up to an additional $5 per package in residential fees when using UPS.
7. You Live in or Are Shipping to a Rural Area
UPS, like many other shipping companies, uses zones to help organize the destinations packages travel to.
Highly populated zones tend to cost less to ship to than other zones, because the distance the package travels is either shorter or costs less, due to the trucks already being in the area.
Most rural areas, however, are located in zones that are further from UPS facilities, and where UPS may not make daily trips to, hence shipping costing more than usual.
Shipping zone pricing also depends on the type of service used to ship the package, ie Air or Ground shipping.
However, as a general rule, it is usually more expensive to ship to rural areas than urban areas.
If you’d like to see UPS Zone Pricing for 2021, you can check out this pdf from their website!
8. You’re Using a Faster Delivery Service
As previously mentioned, UPS determines the cost of shipping, using tools like shipping zones.
However, which shipping service you use also plays a large part in the overall price of shipping a given package.
For example, if you opt for a service like UPS Ground, your shipping costs will be significantly less than if you were to opt for UPS Next Day Air Early.
This is because UPS Ground requires less resources than UPS Next Day Air Early, as it doesn’t have to be delivered as quickly, and is shipped using UPS trucks rather than planes.
So, if you’re shipping a time-sensitive package, or simply want your package to arrive faster, you can expect to pay more for UPS shipping.
9. You’re Shipping a Particularly Large Package
Another reason UPS can be expensive is because of the size of the package being shipped.
UPS determines shipping costs by looking at three factors: the distance a package travels, how quickly the package needs to be delivered, and a package’s dimensions/weight.
We’ve already touched on how the distance and time sensitivity of a package plays into the price, but the size of a package is arguably the most important determining factor in price.
UPS uses dimensional weight to calculate a package’s shipping costs, which is the weight of the package as it relates to the package’s overall size.
So if your package is particularly heavy, or has awkward dimensions, UPS will end up charging more for shipping.
This is because the package will take up more room and take more effort to ship.
This is especially true if you’re shipping a package that is technically oversized, which is any package that meets the following crietira:
- Are more than 150 pounds
- Are more than 165 inches in length and girth combined
- Are more than 108 inches in length
Oversized packages are charged extra fees, known as shipping charge corrections, on top of already higher shipping costs.
To read more about different shipping charge corrections UPS can charge you, as well as how you can avoid them, visit this page of the UPS website.
10. You’re Shipping a Particularly Small Package
While it feels intuitive that larger packages will end up costing you more in shipping costs, the same is true of particularly small packages sent with UPS.
While you won’t have to worry about shipping charge corrections with small packages, the truth of the matter is that UPS just isn’t the best choice for small packages.
UPS uses calculations such as dimensional weight to determine the shipping costs of various packages, and this saves you money if you’re shipping mid to large packages.
For small packages, however, dimensional weight can end up costing you much more in shipping than if you were to opt for services such as USPS Priority Mail.
UPS has been getting more expensive in recent years, although this has largely been due to factors such as the pandemic and labor shortages, which have created ripple effects leading to higher delivery surcharges and fuel costs.
UPS can also be expensive because of the size of your package, where it’s being shipped to, or the shipping service you’re using.