
Feeling the UPS Pricing Squeeze: Handle with Care

UPS’s recent announcement of significant price increases has sent shockwaves through the retail and merchant sectors. Global shipping delivery & logistics company GLS’ US president Steven Bergan shares his thoughts.
“For businesses that rely on affordable, reliable shipping, these double-digit hikes—with minimal notice—aren’t just an adjustment; they’re a gut punch. While cost increases are inevitable, the way UPS has executed these changes smacks of corporate arrogance, putting its partners, customer, and the broader logistics ecosystem in jeopardy.
When Did UPS Get It So Wrong?
UPS recently revealed a 5.9% average rate increase for its Ground, Air, and International services, effective December 2024. FedEx is following suit with a similar hike in early 2025, but that’s just the tip of the iceberg. UPS is also jacking up Additional Handling and Large Package surcharges by 18% to over 21%, an eye-watering blow for merchants shipping bulky items. Add to this a new 2% surcharge on credit card payments, and it’s clear that small and medium-sized businesses are being disproportionately squeezed.
On top of these increases, UPS’s failure to renegotiate its partnership with the USPS for its SurePost service has further complicated matters. Merchants depending on this hybrid last-mile delivery solution now face reduced service options and steeper fees. UPS’s inability to secure a deal with USPS and subsequent passing of the buck to customers highlights a troubling lack of foresight and accountability.
Why This is a Cold-Water Moment
For retailers, shipping isn’t just an operational expense—it’s a cornerstone of customer satisfaction. Shoppers expect quick, affordable delivery, and UPS’s aggressive pricing threatens to disrupt this expectation. Retailers are left with two unappealing options: absorb the costs and risk shrinking margins or pass them onto customers and risk alienating them. Either way, businesses lose.
Smaller retailers are particularly vulnerable, as they often lack the shipping volume to negotiate favourable rates, unlike larger competitors. This disparity forces them into a difficult position: either absorb these costs or risk increasing product prices to the customer, driving them toward larger retailers with more competitive pricing. It’s a lose-lose either way.
The synchronised rate hikes by UPS and FedEx also shine a harsh spotlight on the dangers of a duopoly. Together, these giants control over 70% of the U.S. parcel market, allowing them to dictate terms with little regard for their partners.
Decentralisation and Diversification
Merchants have to treat this as a wake-up call. Dependence on UPS and FedEx has become a liability, and diversification is now a survival strategy. Diversification means more than exploring new carriers—it’s about building a resilient logistics framework. Here’s how merchants can take action:
- Explore Alternative Large Carriers: Companies like GLS and OnTrac are gaining traction as viable alternatives and supplements, offering competitive rates and more personalised service.
- Invest in Technology: Advanced shipping platforms empower merchants to dynamically compare rates, optimise routes, and allocate volume across multiple carriers.
- Negotiate Smarter Contracts: Traditional volume commitments often come with strings attached. Merchants need contracts that prioritise flexibility and minimise punitive fees.
- Leverage Hybrid Solutions: Crowdsourced delivery platforms can complement traditional carriers, providing innovative last-mile solutions.
The Legal and Strategic Implications
UPS’s actions haven’t gone unnoticed. Potential shareholder lawsuits will likely underscore internal discontent with the company’s direction, raising questions about its long-term viability. For merchants, this could be a signal to re-evaluate relationships with logistics providers and even consider legal options if contractual terms are exploitative.
Meanwhile, FedEx’s narrower full-year forecast for 2024—driven by customers fleeing to cheaper alternatives—serves as another cautionary tale. These shifts highlight the growing fragility of the duopoly’s dominance and the urgent need for merchants to diversify.
Turning Challenges into Opportunities
UPS’s price hikes are undeniably disruptive, but they also offer retailers a chance to rethink their logistics strategies. This isn’t just about managing costs; it’s about future-proofing operations. By diversifying partnerships, investing in technology, and maintaining agility, businesses can not only weather this storm but emerge stronger.
In conclusion, UPS’s aggressive pricing strategy should be a wake-up call for the entire retail industry. This is a moment for merchants to break free from the duopoly’s grip and prioritise flexibility, innovation, and collaboration. The logistics landscape is evolving, and businesses that adapt will be the ones to thrive.”