(Bloomberg)—The U.S. Postal Service is rolling out its first peak-season surcharges for commercial package deliveries as the agency seeks to cope with costs from the coronavirus pandemic and an expected surge in holiday demand.
The increases range from 24 cents to $1.50 per package and will last from Oct. 18 to Dec. 27, the post office said Friday in a notice to the Postal Regulatory Commission. The higher prices will affect Amazon.com Inc. (No. 1 in the 2020 Digital Commerce 360 Top 500), smaller retailers and couriers such as United Parcel Service Inc. that rely on the government agency as an inexpensive last-mile delivery option.
“Most everyone uses the Postal Service in some form or fashion,” said John Haber, CEO and founder of Spend Management Experts, a consultancy that helps shippers lower delivery costs. “It’s a very big deal.”
The post office’s price increases follow similar moves by UPS and FedEx Corp., which added surcharges earlier this year as the pandemic prompted more people to order goods online rather than risk shopping in stores. Package carriers are expected to be strained this holiday season, raising concern over their ability to keep pace.
The Postal Service handled 34% of package deliveries during last year’s holiday shopping season, the most of any carrier, according to SJ Consulting Inc. UPS was second with 32% while FedEx got 19%.
Because of the pandemic, U.S. package volume has jumped about 20% for UPS and FedEx. It surged 50% for the Postal Service in the quarter ending in June compared with the same period a year earlier.
UPS last week announced hefty seasonal charges of as much as $3 per ground delivery for the holiday season, and FedEx is expected to follow suit.
The Postal Service’s temporary increases on ground deliveries range from 5.7% for priority mail to 13% on lightweight parcels. The money-losing agency has been contending for years with the decline of letters, its most profitable business, following the rise of the internet. The surcharges will provide “much needed revenue,” according to an agency statement.
The federal mail service has become a political target in recent debates over mail-in voting for the presidential election. President Donald Trump opposes $25 billion in emergency funding for the agency proposed by Democrats. Trump has linked the funding to his resistance to expanding mail-in voting to help reduce crowds at polling places during the Covid-19 pandemic. The agency has said it can’t guarantee that all mailed ballots would be delivered by the Nov. 3 election.
As the only courier that makes daily rounds to every home, the Post Office has lagged its rivals in raising prices amid increased e-commerce, said Satish Jindel, founder of SJ Consulting.
It’s “about time they capture the value of their capacity and service,” Jindel said in an email.
FedEx joins rush to add fees for holiday deliveries
Surcharges on regular shipments to homes will range from $1 to $5 from Nov. 2 to Jan. 17, FedEx said on its website Tuesday. That marks the first time since 2016 that the company has applied special peak-season fees, and the move follows similar efforts by United Parcel Service Inc. and the U.S. Postal Service.
“As the impact of the virus continues to generate a surge in residential deliveries, we are entering this holiday peak season with extremely high demand for capacity and are experiencing increased operating costs across our network,” FedEx said. “We anticipate residential volume to continue to surge into the new year.”
Demand for residential deliveries has soared since mid-March when the coronavirus pandemic drove U.S. consumers to stay home and order online. FedEx’s ground deliveries rose about 20% for its quarter running through May, similar to UPS’s second-quarter increase, and the Postal Service saw a 50% increase in packages for its quarter ending in June.
With people making more purchases online than ever, the holiday delivery surge will likely be historic, raising concerns among shippers over package-handling capacity. Meanwhile, the spike in package volume has handed couriers pricing power.
Both FedEx and UPS introduced surcharges earlier this summer, in part to make up for some of the extra cost to keep workers safe while operating during a pandemic. This latest move isn’t a surprise. FedEx’s Chief Marketing Officer Brie Carere said in June there would be surcharges this peak season.
Still, in the case of UPS, shippers hadn’t expected the hefty size of the surcharges, which are aimed at large shippers who send 25,000 packages a week or more. Depending on the volume above February levels, the UPS surcharges could rise to $3 for ground packages and $4 on air deliveries.
The Postal Service joined in last week with its first-ever peak-season surcharges on packages, ranging from 24 cents to $1.50 on express deliveries.
In the 2020 Digital Commerce 360 Top 1000, 211 retailers name FedEx as their shipping carrier, 281 use UPS and 219 use USPS, according to Top500Guide.com.