USPS-OIG – 7/3/17 – Five months to go before the holiday shopping season and online retailers are already getting Scrooged. UPS recently announced it will levy new “peak” surcharges on packages delivered to residences between Thanksgiving and Christmas.
Ground residential deliveries will cost 27 cents more per package in the last two weeks of November and the week before Christmas. Air deliveries get a different surcharge scheme and only over the week before Christmas: Between Dec. 17 to Dec. 23, UPS will charge 81 cents for next day air and 97 cents for second- and third-day air deliveries.
UPS handles 19 million packages on a normal daily average. During the peak holiday season, that number jumps to more than 30 million a day. This requires the company to add planes, trucks, and thousands of employees. UPS claims the surcharges are necessary to offset the additional costs.
Retailers will undoubtedly long for the Ghost of Christmas Delivery Past, when carriers ramped up capacity but didn’t pass those costs on to them. But this year, retailers will have to decide if they will eat the added costs or pass them on to consumers in the form of shipping and handling fees. Not an easy decision as online shoppers have grown accustomed to free shipping.
Some analysts say the UPS surcharge could prompt e-tailers to push up their best holiday offerings to mid-November rather than the traditional Cyber Monday sales. Consumers willing to do some early holiday shopping could benefit.
Some might argue this move by UPS puts FedEx and the U.S. Postal Service in the driver’s seat this holiday season. However, many analysts expect FedEx to follow UPS’s lead and announce peak surcharges as well. So, maybe the Postal Service benefits? Quite possible, but the holiday shipping season stresses all of the carriers’ networks. An inundation could be too much of a good thing for any one carrier.
Still, the Postal Service looks positioned to gain from UPS’ move – especially if FedEx follow suits. It certainly could win in the hearts and minds of online retailers and their customers. No peak surcharge is a strong marketing tool.
Do you see the Postal Service benefitting from UPS’ peak surcharge? Do you expect to see online retailers add shipping fees to their online offers? Are you willing to pay more for shipping during the holidays? Or will you walk away from a purchase if the retailer charges a shipping fee?