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Higher Shipping Costs Will Be Passed On

Published October 20, 2008

KENT, WA (BRAIN)—With United Parcel Service and FedEx both recently raising its shipping rates for 2009, distributors will have to soon decide on the best course of action to take.

According to Seattle Bike Supply president Chuck Hooper, the northwest distributor has yet to set a hard course of action, especially with other variables to consider such as fuel surcharges.

“Our current free freight policy is set at a rate with a lower minimum in comparison to some of the other companies out there,” Hooper said. “We may need to adjust ours upward but at this point we will not set a hard plan into place until after the first of the year. Realistically, though, none of us in the supply chain [manufacturer to dealer] can absorb these large increases and eventually they will be passed on to the consumer.”

The Hawley Company, which currently uses both UPS and FedEx, offers a freight credit allowance program to its customers. If a customer’s order exceeds $600, then the South Carolina-based distributor allows a freight credit allowance of up to 8 percent the invoice amount.

“Our product pricing model takes overall freight costs, both inbound and outbound, into consideration,” said Steve Hawley, president of The Hawley Company. “Certain items are impacted more by freight than others. We continually monitor our costs of doing business in relation to our pricing model, and make adjustments as needed.”

Custom Cycle Supply, a BMX distributor in Florida, uses UPS for most of its inbound and outbound shipping needs.

“We offer dealers free freight on orders over $700,” said Jeff DeVido, president of Custom Cycle Supply. “We have not raised our prices due to higher shipping, but have had to raise prices due to our supplier raising prices to us. I'm proud to say that our MCS and Bully bicycles only went up $5 for our ‘09 bike; I'm hearing as high as $40 to $50 from some of the other companies.”

Jeff Milbauer, owner of Valley Bike and Ski in Apple Valley, Minnesota, said retailers that qualify for free shipping on large orders will be unaffected by shipping rate increases.

“We do a fair amount of KHS as well as QBP. $500 is the minimum for free freight—that’s not very challenging to get to as a parts order for a decent size dealer,” Milbauer said. “The smaller dealers that can’t get the volume to get those free freight thresholds will have to pay higher freight rates.”

—Jason Norman

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