As reported by Total Retail
Tuesday May 9, 2017
This article originally appeared on May 9. Given last week’s announcement from UPS that it will be adding peak surcharges to U.S. residential packages during the holiday shopping season, we thought this article took on even greater importance. With many retailers’ e-commerce sales growing — and thus more packages being shipped via carriers like UPS — it’s critical that they have insights into how to minimize shipping costs, which will ultimately help their bottom lines grow.
I recently wrote an article for the Inner Circle, the Women in Retail Leadership Circle’s member e-newsletter, and referenced the fact that new “peak season”surcharges are already making it into the market. During its first-quarter earnings call, UPS wasn’t shy about alerting the investment community that it’s going to ask customers to pay extra in the form of peak season fees, particularly when a retailer fails to ship as many packages as planned during seasonal peak periods.
New fees could also be applied if a retailer’s shipment characteristics strays off course in other ways, such as if the weights or sizes of packages shipped are significantly mismatched from original forecast — i.e., incorrect DIMs and weights.
As I predicted, UPS, like rival FedEx, is looking for additional revenue streams to recoup the billions it’s investing to add capacity and transform its network to optimize operating margins in the e-commerce space. The holiday “peak” season, defined by the National Retail Federation as sales in the months of November and December, is the biggest time of year for retailers of all shapes and sizes, and can account for as much as 30 percent of a retailer’s annual sales. This holiday peak season is also a critical time for UPS and FedEx, when daily package delivery can swell to upwards of over 30 million packages per day, compared to 17 million on a nonpeak day. UPS and FedEx have been very public about their network expansion activities and continuously working to expand their peak season operations. For many of its retail customers, those activities are already used to justify higher base and accessorial pricing.
Shipping costs continue to be the No. 1 reason for cart abandonment, and this new “surge charge” won’t help.
Ken Wood is the founder of LJM Consultants. LJM helps clients negotiate “Best in Class” UPS/FedEx agreements. LJM was recently named the “best parcel auditing company in America” and was also inducted into Inc. Magazine’s Top 500/5000 fastest growing companies in America for 2013. To learn how LJM Consultants can help your company get the parcel contract you deserve, call 631-844-9500 or email kenwood@myLJM.com.