Take a look at your Fedex and UPS bills, you’ll probably see an increase in costs for deliveries that are local. You should explore using a local carrier to avoid the costs associated with running a nationwide overnight courier.
King Courier can handle your local deliveries without Fuel Surcharges, Residential Surcharges or City Surcharges. Let us know how we can help. Contact Us
Ground Delivery Costs Rose in Q1 2025 – Here’s Why
https://www.supplychaindive.com/news/parcel-delivery-prices-q1-2025-cowen-afs/744914
If your business relies on ground shipping, you likely noticed a spike in delivery costs during the first quarter of 2025. From higher transportation fees to increased surcharges, shipping expenses have put pressure on both retailers and consumers. But what’s driving this sudden jump in ground delivery costs?
In this blog post, we’ll break down the key reasons behind the increase, how it’s affecting businesses, and what you can do to mitigate the impact.
1. Fuel Prices Continue to Climb
One of the biggest contributors to rising ground delivery costs in Q1 was the ongoing increase in fuel prices. As diesel and gasoline costs remain high, shipping carriers have passed those expenses on to customers through fuel surcharges and adjusted pricing models.
According to the U.S. Energy Information Administration, diesel prices were up over 12% compared to Q1 2024, adding significant strain on logistics budgets.
2. Labor Shortages Are Driving Wages Up
The logistics industry continues to face a shortage of qualified drivers and warehouse workers. In order to attract and retain talent, many shipping companies increased wages, bonuses, and benefits—costs that ultimately get reflected in shipping rates.
With fewer drivers available and demand for fast shipping remaining high, carriers are prioritizing premium routes and charging more for less efficient zones.
3. Inflation and Operational Costs
General inflation continues to drive up the cost of doing business. From vehicle maintenance and insurance premiums to packaging materials and route optimization technology, nearly every aspect of ground delivery is getting more expensive.
The result? Ground shipping carriers are adjusting their pricing structures to maintain profitability amidst rising costs.
4. Carrier Pricing Strategy Adjustments
Major carriers such as UPS, FedEx, and USPS implemented General Rate Increases (GRIs) early in the year. These annual adjustments are common, but 2025’s increases were steeper than usual, ranging from 5.9% to 7.4% on average for ground services.
Many carriers also introduced additional fees for residential deliveries, oversized packages, and deliveries to remote areas.
5. Increased E-commerce Demand
While e-commerce growth has stabilized somewhat since the pandemic boom, consumer expectations for fast and free shipping remain. The volume of packages shipped ground is still higher than pre-2020 levels, putting strain on delivery networks—especially in urban and suburban areas.
More volume means more costs, and carriers are adjusting rates to balance speed, efficiency, and profitability.
How Businesses Can Respond
The rising cost of ground delivery is a challenge, but it’s not insurmountable. Here are a few strategies to reduce the impact on your bottom line:
- Optimize packaging to reduce dimensional weight charges.
- Negotiate better rates with multiple carriers.
- Consider regional carriers for shorter hauls.
- Use shipping software to compare rates and delivery times in real time.
- Encourage customers to choose slower delivery options in exchange for discounts or incentives.
Final Thoughts
Ground delivery costs increased significantly in Q1 2025 due to a combination of economic, logistical, and strategic factors. While it presents challenges for e-commerce and retail businesses, understanding the reasons behind the rise—and implementing cost-saving strategies—can help you stay competitive in a shifting landscape.
Stay informed, stay agile, and plan ahead to navigate the evolving world of last-mile logistics.