Retailers will have to pay more for last-minute shipments sent during the holidays via UPS Inc. this year.
UPS today announced it is rolling out a slew of surcharges on packages shipped during the peak holiday season. The biggest impact will be on packages shipped during the final week before Christmas, from Dec. 17-23, when UPS will charge a 97-cent surcharge on packages shipped via 2nd Day Air Residential and 3rd Day Select Residential; an 81-cent surcharge on items shipped via Next Day Air Residential; and a 27-cent surcharge on items shipped via Ground Residential. UPS is also adding a 27-cent surcharge on all packages shipped via Ground Residential from Nov. 19-Dec. 2.
UPS will also charge more for larger packages and those that “exceed maximum size limits” from Nov. 19-Dec. 23, though the shipping carrier did not specify the increase.
UPS argues the surcharges are necessary for it to provide the level of service that both shoppers and retailers expect during the holiday season.
“We’re focused on helping our customers achieve success during some of their most important selling seasons,” says Alan Gershenhorn, chief commercial officer. “To meet their requirements, UPS flexes its delivery network to process near double our already massive regular daily volume, and that creates exceptional demands.”
Neither FedEx Corp. nor the United States Postal Service have announced plans to implement a similar surcharge during the holiday season. A USPS spokesman says the carrier has no plans on implementing any holiday surcharges, while FedEx did not return a request for comment.
Tom Craig, president of supply chain consultancy LTD Consulting, says he thinks the surcharge is primarily going to impact small-to-medium size retailers, and that those retailers are just going to have to grin and bear it.
“Their ability to get good pricing with these people is limited anyways because of volume,” he says. “They don’t have as much of a hammer to mitigate this negotiation.”
Joe Wilkinson, director of transportation consulting at global supply chain consulting firm Envista, says UPS’s announcement likely came too late in the year for retailers to alter their free shipping plans for the holidays.
“I don’t know if there’s time to change it,” he says. “We’re still in mid-June. This is what customers expect whether or not you’re happy about it.”
With that being said, he does expect retailers to take a look at how things shake out this holiday season and potentially recalibrate their free shipping offerings in time for the 2018 holiday shopping season.
“I think shippers are going to take this season to reshape those types of expectations for coming seasons, but they were always going to have to do that,” he says. “Free shipping has a limited life span. Free doesn’t move, but your cost moves, and your cost to service that goes up every year.”
Craig says he wouldn’t be surprised to see FedEx make a similar announcement that it too is tacking on surcharges during the holiday season at some point.
“Why would it pass up the opportunity to increase revenues by following the leader,” he says.
At least one retailer, luxury luggage and accessories brand Ghurka, says it’s planning on simply absorbing the cost rather than raising its prices to consumers to cover it. Ghurka currently offers free shipping and this surcharge will not cause the retailer to change its policy.
“I’d rather pay that dollar and make sure that package arrives when my client wants it,” says Justin Sellman, vice president of e-commerce and digital strategy. “Whether it’s UPS’ fault or not, the client always comes back to you. If that is what UPS says they need to do to ensure delivery, I’d rather them to this than fail and not charge that surcharge.”
During the first quarter ended March 31, UPS reported package shipments using its Ground service grew by 2.3% year-over-year. According to Top500Guide.com, UPS is the shipping carrier for 421 retailers in the Internet Retailer 2017 U.S. Top 1000, according to Internet Retailer’s Top500Guide.com.Favorite