Shipping and fulfillment have become some of the fastest-growing expenses for businesses. What once seemed straightforward and relatively easy to manage has now become more complex than ever before, resulting in merchants paying higher rates every year.
Rising shipping rates have slowly crept into profit margins for both D2C and B2B ecommerce sellers worldwide.
The biggest problem with these rising costs is that many businesses haven’t adjusted their pricing to account for changes. So a 5% increase in shipping can wipe away your profits altogether if you’re already operating on razor-thin margins.
Fortunately, there’s something you can do about it. Shipping costs are negotiable, and you don’t need to let them destroy your profits for much longer.
The Current State of Shipping and Fulfillment
The shipping industry has changed drastically over the last decade. You’ve got a high demand for faster deliveries, combined with global supply chain challenges impacting nearly every industry.
When you factor in the explosive growth of ecommerce putting more pressure on shipping carriers, the rising rate problem was inevitable. And there’s no sign of this slowing down in the near future.
- 52% of ecommerce merchants cite rising shipping costs as their greatest business challenge.
- Oil prices have been fluctuating, with the average price per barrel at $71.79.
- This has forced carriers to implement fuel surcharges to offset these costs.
- In fact, fuel alone can represent roughly 25% of a truck’s operating expenses.
- UPS and FedEx averaged a 5.9% to 6.9% rate increase on shipping costs for 2025.
- This rate hike doesn’t include fuel surcharges, which can push the average shipping increase as high as 25% in some categories.
- Ground surcharges for residential deliveries increased by as much as 8% in 2025.
Shipping and fulfillment providers are also dealing with rising labor costs, seasonality, and supply chain disruptions—all of which continue to keep pushing rates even higher.
Common Reasons Your Business Shipping Costs Keep Rising
Why do your business shipping costs keep rising? It’s likely a combination of several factors.
These are the most common reasons for rising shipping rates that we see when auditing statements for sellers:
Annual Rate Hikes
The most predictable reason for rising shipping costs comes in the form of a general rate increase announced by the carriers every year.
Here are some of the average shipping rate increases from major carriers affecting costs in 2025:
In total, there was effectively a 5.5% average increase in 2025 across the board from these carriers.
Remember, this is just a general increase on base rates. It doesn’t include surcharges or other fees.
Fuel Surcharges
Fuel charges are one of the most volatile components of shipping costs.
These typically fluctuate based on current fuel prices and are adjusted weekly or monthly by most carriers.
When crude oil prices spike, your shipping costs will immediately follow suit. And to make matters worse, you’re not usually given much notice to plan accordingly or make adjustments ahead of the increase.
Dimensional Weight Pricing
Many carriers have adopted dimensional weight pricing when calculating shipping costs.
With dimensional pricing, costs are based on the package’s size and volume—not just its actual weight.
So if your products are bulk but lightweight, you’re effectively just paying for air in the box. This pricing model can be much higher than weight alone for certain types of products, and businesses that were previously used to just weight-based pricing haven’t adjusted.
Additional Service Fees
The list of additional service fees imposed by shipping carriers seems to be expanding every year.
- Residential delivery surcharges
- Saturday delivery fees
- Address correction charges
- Signature confirmation fees
- Delivery area surcharges
I’m just barely scratching the surface here.
All of these seemingly small incremental costs can accumulate quickly. And at scale, it can result in tens of thousands in additional fees charged to your account every month.
These used to be just standard services that shipping carriers provided. But now they’re premium add-ons used to boost revenue for providers.
Minimum Package Charges
This has been tough for businesses that ship a high volume of small and lightweight items. Carriers apply a minimum base rate that applies regardless of a package’s actual weight or size.
So even if you’re shipping something really small, like guitar picks or tennis racket strings, your shipping costs can be expensive.
These types of items are charged at a disproportionately higher rate compared to the actual cost of the shipping service.
Contract Escalation Clauses
If you have a shipping contract with a carrier, there’s a good chance it has a built-in escalation clause.
These contract terms can automatically increase your rates over the lifetime of the agreement, even outside of the standard annual rate hikes.
Some of these clauses are tied to economic indicators like inflation, while others simply include predetermined percentage-based rate hikes that compound annually.
How Increased Shipping Costs Impact Your Business
Rising shipping costs can create a snowball effect throughout your operations.
First and foremost, higher costs per order will directly reduce your profit margins. This ultimately forces you to make tough decisions.
You’re forced to choose whether to absorb the costs or pass them to your customers. The latter can hurt your competitiveness and potentially result in lost customers, but absorbing the costs could result in unsustainable margins.
Free shipping has become an absolute must for ecommerce businesses. But it’s incredibly difficult to maintain.
In fact, 62% of people won’t buy something online if free shipping isn’t offered.
This added pressure extends beyond the immediate profits you’re expecting on each order. Shipping cost increases can force other strategic designs about product expansions or target markets. Some companies may find that certain products or segments are no longer economically viable to serve—and it all stems from the rising shipping costs.
How to Stop (or Slow Down) Rising Shipping Costs
The key to controlling your shipping cost is all about taking a proactive approach. You can’t just sit back and do nothing, hoping that carriers will lower your rates (that’s extremely unlikely).
And while you can’t control global fuel markets or ecommerce demand, here are some things you can do to keep your costs in check:
- Audit Your Invoices: Do this regularly to catch billing errors, unnecessary fees, or suspicious charges that could violate your contract.
- Negotiate Directly With Your Carrier: Ask for better base rates, lower surcharges, waived fees, and volume discounts.
- Optimize Packaging: This will help you reduce charges affected by dimensional weight pricing.
- Review Contracts Regularly: To prevent and prepare for potential escalation clauses.
- Monitor Industry Changes: So you can stay informed about upcoming rate increase announcements from the carriers and potential supply chain issues that could lead to surcharges.
- Work With a Cost Reduction Consultant: Let an expert cost reduction consultant handle the audit and negotiation on your behalf, so you can focus on running your business.
Reach out to our team here at The Cost Guards for help navigating the complex world of shipping fees. We’ll start by auditing your invoices to identify overages and savings opportunities before negotiating directly with your carrier for a lower rate.
If you call your carrier and ask for a discount, they’ll likely tell you that you’re already getting the best possible deal.
But when we call, we know what their true rock-bottom number is (because we’ve seen it on other statements), and we’ll make sure they adjust your rates accordingly.
Final Thoughts
You can’t expect to pay the same shipping costs that you paid five or ten years ago. Unfortunately, those days are over.
That said, you shouldn’t just blindly accept every rising shipping cost that’s impacting your ecommerce business.
Whether it’s a general annual rate increase, fuel surcharge, or obscure service fee, you should be questioning these charges that are costing you thousands of extra dollars every month.
Your shipping costs might be rising, but they don’t have to be rising as sharply as you’re currently allowing them.