FedEx and UPS rate increases recently took effect while fuel prices, a key cost for shippers, are at record lows. Crude oil broke $50 a barrel, the lowest in nearly six years. So what else is driving changes in shipping prices?
The answer, in short, likely includes the Amazon effect.
U.S. trucking tonnage is at record highs, reflecting a pickup in retail sales, factory output and the broader economy. Few trucks are idle, which basically means businesses are hauling a lot of stuff at the moment, and space on pallets, on which goods and shipping containers are placed, is a hot commodity.
Before the brave world of online sales, truckers and shippers simply worried about the weight of things. Imagine tonnage and pounds as related to tractors, toys and apparel, hauled across the country. Then consumers through websites — both small and large, including Amazon.com — began ordering lots of things for doorstep delivery. Online shoppers have goods from flat screen TVs to boxes of laundry detergent shipped.
Along the way, partly induced by minimum purchase requirements to qualify for free shipping (think Amazon Prime accounts), shoppers began indulging in small add-on items, say, a pack of razors to a tube of lipstick. Why not? It's free shipping! But tiny products including everything from dime-size ear buds to a jar of eye cream under one ounce — wrapped in bubble wrap, then encased in giant boxes — has consequences. There's a ripple effect to the broad transportation sector, the environment and ultimately consumers.