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Happy Streaming Holidays

It's not exactly top-secret information, but it has been flying under the radar. In addition to the US Postal Service, rate hikes have been quietly announced by both FedEx and UPS. This is the second time this year that FedEx and UPS have raised their rates.

FedEx made its announcement on Sept. 22; UPS on Nov. 18. The US Postal Service released the news Nov. 22, on the heels of a more alarming announcement that it will have to cut back services in order to meet its budget.

All of the carriers have various offsets to the higher prices: For example, FedEx has an adjustable fuel-price threshold, as does UPS. The US Postal Service is making it more attractive for customers to ship in standard-sized envelopes or boxes, or in increments of a half-pound and up.

All told, the rate hikes average out to 6.9 percent.

I, like many people, don't pay much attention to this stuff until the holidays. I actually don't ship many gifts: my families are all within driving distance, and we make a point of getting together during the extended holiday season. But I do know the electronics supply chain relies heavily on these carriers, and companies no doubt negotiate various volume discounts for all the freight they ship. Still, 6.9 percent sounds like a lot to me.

Don't get me wrong — I'm not screaming “Unfair!” I know fuel prices have been all over the map this year and there is no guarantee of stability in oil-producing nations. Companies have the right to make a profit, and if I don't like the rate hikes, I'll hop in my car or shop elsewhere.

I've also been getting a lot of emails from retailers about free shipping. {complink 11480|Amazon.com Inc.} is the most recent. I haven't gotten any further on my holiday shopping than I have on stringing my Christmas lights. (See: ‘Tis the Season…) Ultimately, it all gets done, and I rarely end up paying a premium for anything I have to ship. It's also my fault if I procrastinate, so paying a “penalty” almost seems fair.

The biggest impact I see — and this ties in with a lot of debate we've had here on EBNonline — is how this will affect such businesses as {complink 10269|Netflix Inc.}. NetFlix is already being challenged by companies offering streaming video, and the competition is only going to get worse. (See: Is It Time to Ditch Your Cable? ) This week I read that Verizon is thinking about getting into the streaming-video business (no confirmation yet).

Setting aside the debate that this will cannibalize revenue from cable (the relationships among Internet content providers, cable services, and TV networks requires a spreadsheet), I see NetFlix going the way of the dodo if it doesn't invest in a streaming video business pronto. NetFlix's main business relies on sending DVDs by mail. When the postal service cuts back on deliveries, it'll take something like three or four days to get a DVD by mail. I know there are some folks out there who are willing to do this, but most of them will go to grocery-store kiosks first. I fear the days of content-by-mail are over.

The one possible exception I see is buying a DVD gift set for a movie or program you just have to have. But in that case, I'd order from Amazon.com, which delivers it for free.

Happy Holidays.

25 comments on “Happy Streaming Holidays

  1. Nemos
    December 10, 2011

    Happy Holidays.

    “it'll take something like three or four days to get a DVD by mail.”

    I believe also that this action is the best way to save some money. The one, two days delivery costs enough and for products like movies or books and toys, it is not necessary to order with this way. By the way, I know this instantaneously happiness that occurs when we are buying or ordering a product, but it is only for some seconds so rethink again it worth the money for speed post?

  2. stochastic excursion
    December 12, 2011

    Both UPS and FedEx assess fuel surcharges on top of their base charges, so increases in their base rates can't be attributed to rising energy costs.  More likely both carriers are topping off their warchest for an eventual takeover of the Postal Service.  Noises heard from Congress and other media seem to indicate this is imminent.

  3. Daniel
    December 12, 2011

    Barbara, I don’t know the basic reason behind the rate hike. Most of the parcel and logistics companies are adding fuel surcharge as a variable cost with the fixed shipment charges. This fuel cost may change from day to day based on fuel cost. I think probably they may think about taking the advantage of season for a better profit.

  4. mfbertozzi
    December 12, 2011

    I could agree with all previous posts; fuel charge goes up & down, is true and in particular, analyzing past ten months, it is ramping on. Neverless, in my opinion, it is not enough for increasing endusers costs from carriers, let me explain my point of view: talking about logistics, we could absolutely say Internet technology has allowed considerable savings in processes automatization and their management; as consequence, including this factor, for istance, endusers would benefit of savings received by carriers. Has anyone experienced some “price off” from carriers for similar reasons? Not sure to receive positive reply.

  5. SunitaT
    December 12, 2011

    @Barbara, The shipping companies are often considered strong bellwethers of the overall economic climate. So do you think  confidence at FedEx and UPS truly indicates that the economy is back on track ?

  6. SunitaT
    December 12, 2011

    I don’t know the basic reason behind the rate hike.

    @Jacob, I feel rising inflation is one of the main reasons for this rate hike. And moreover fuel prices are going up in developing countries, for example in India the oil prices jumped from 50Rs to 75Rs in last one year because of currency depreciation.

  7. Barbara Jorgensen
    December 12, 2011

    Tirlapur–that is one point of view that is being discussed–that the rate hikes indicate the economy is recovering. I'm not so sure about that. I've been in a situation where if demand goes down, prices actually go up to make up for the shortfall. After years of conserving water, my town raised its water prices because it couldn't meet expenses. At this time of year in particular the freight companies know they have a captive audience, so to speak, and oil prices give them a valid reason for the increase. And once they go up, they don't come down. What I think is more likely is, if oil prices stay low, we'll see discount incentives for freight, rather than an across the board decrease.

  8. AnalyzeThis
    December 12, 2011

    But I do know the electronics supply chain relies heavily on these carriers, and companies no doubt negotiate various volume discounts for all the freight they ship.

    Right. So this hike doesn't really affect everyone. It doesn't really have any impact on me, for example.

  9. Barbara Jorgensen
    December 12, 2011

    DQ–only to the extent that you use these services. Sometimes, the premium for overnight shipping is worth it–other times, not so much.

  10. Ariella
    December 12, 2011

    The selling point for most online shoppers is free shipping. In fact, I find I have to resist the pull of free shipping from Amazon when another online seller offers the same item for less — even with the cost of not free shipping factored in.

  11. Nemos
    December 12, 2011

    You are so Lucky Ariella , they dont give free shipping for international orders ;(

  12. Ariella
    December 12, 2011

    Good point, Nemos. I've noticed that a number of sites now boast of international shipping but not of free international shipping.

  13. bolaji ojo
    December 12, 2011

    Barbara, I recently had to mail a box of gift items urgently to Texas and tried one of the major courier companies. The parcel had to get there the next day and the courier company told me it would cost $134. I bought the box from them but decided to get a quote from the United States Postal Service. They charged $70 for the same service. I saved a buck or two!

  14. itguyphil
    December 12, 2011

    I had the same type of experience recently. The unnamed company wanted to charge $41 to WRAP and BOX the item then another $54 to ship.
    I wondered, why does it cost $40+ to put bubblewrap around something and tape the box shut???

  15. JADEN
    December 13, 2011

    May be the cost of logistics is the reason for the rate hike, or possibly they are taking advantage of the season.

  16. FLYINGSCOT
    December 13, 2011

    DVD, CD, Blue Ray……it's only a matter of time before they are mere curiosities for our children and grandchildren.

    Don't get me started on inflation…….and how come my pay is frozen yet everything is costing way more…..

    Gooooos….fraaaahhhhh……baahhhhhhh

  17. Jay_Bond
    December 13, 2011

    One of the best things going right now is “ship to store”. I can't tell you how many times we will order something online and have it shipped to the store for free and pick it up when we are doing errands. Even if it's the only thing we have to pick up it is still cheaper than standard shipping, unless you're using Wal-marts $0.97 shipping.

    The stores benefit by shipping the product with there normal deliveries and the consumer benefits by free shipping.

  18. Barbara Jorgensen
    December 13, 2011

    Readers–am finally getting around to doing some online shopping, and when the postage represents about 50% of what the gift cost, I gotta think twice. Luckily, there are a lot of free shipping options out there–IF you spend more than $100. JayBond's solution is a good one–ship to the store. Many retailers offer different products online than they do in the storefront, so it's a good compromise.

  19. Tim Votapka
    December 13, 2011

    Great post! But at least today's young generation knows what it means when you say “be kind rewind!” Their kids won't have a clue, but that's their problem!

  20. Barbara Jorgensen
    December 15, 2011

    I hear ya, Tim! I can still remember back in college when a friend of mine bought the White Album on white vinyl! And the Born to Run album cover folded out to that awesome Bruce/Clarence b&w image. (I'm already sounding like my grandmother but I'm only 50…ish…) I wouldn't go back to casettes or VCRs, but some things, such as iconic album covers, get lost in translation. Where would Abbey Road be w/o the photo? A two-inch screen doesn't do it justice.

  21. Mr. Roques
    December 15, 2011

    How can Amazon apply this? Or does this only work with brick-n-mortar stores w/ online component?

    In the Dominican Republic, ordering things online has been a growing business, nowadays, seems everyone has a US address and has at least one courier to bring it here.

    Stores are complaining (we are not going to their store) but they have a huge markup!

    Governement is startint to notice because that doesn't pay taxes (if it's less than $200).

    Customers started ordering clothes and non-perishables but I've ordered boxes of cereal (more variety and a ~US$8 difference – per box!).

    Eventually stores will have to either lower their markup or create another courier company.

  22. Barbara Jorgensen
    December 16, 2011

    Mr R: I suspect the price differences have more to do with local taxes and/or levies…in theory, the Internet should be tax-agnostic because it really isn't “headquartered” anywhere: it is governments that are after the taxes. They have found it is diffcult to enforce, but that doesn't stop them from trying…

  23. SunitaT
    December 20, 2011

    At this time of year in particular the freight companies know they have a captive audience, so to speak, and oil prices give them a valid reason for the increase.

    @Barbara, thanks for the reply. I don't think oil is a valid reason for this price, because oil prices have corrected significantly this year. Infact oil is trading below 100$ compared to its life time high of 140$+.


  24. Kunmi
    December 31, 2011

    Happy holiday and I wish all a wonderful new year. If I may speak this word that the new year will usher in a better price for oil. It has been steady for few months and I think we will have it better in 2012

  25. Mr. Roques
    January 19, 2012

    Companies in the US aren't complaining because they *probably* have an online component but at first, they probably were short-sighted and thought they would lose money because they needed to lower markups to compete.

    In the DR, we are going through that first phase where companies are starting to notice that sales are down, and the government is also noticing and wanting to do something about it. 

    Solution: companies should find ways to lower prices (either stop thinking they can be millionaires by reselling swimsuits, find other shipping mechanisms, etc) and the government might start taxing imports, which I think they will start doing.

    Customers: find ways to evade those taxes, continue to buy online.

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