Will retailers pass along or eat COVID-19 shipping surcharges?
It’s not unusual for United Parcel Service or FedEx to tack-on surcharges for retailers and consumer-direct brands shipping products during peak periods leading up to Christmas. Merchants do not, however, expect such charges in June. Of course, this June is unlike any June experienced by anyone ever.
UPS announced that it is adding a 30 cents per package surcharge to shipments from customers that exceed their average weekly volume in February by 25,000. An additional surcharge will be applied to oversized packages sent by companies that ship more than 500 packages a week. The nation’s largest parcel delivery service said that it has seen its mix of deliveries shift from around 50 percent going to individual households to around 70 percent since the coronavirus pandemic began in the U.S.
FedEx is also adding a surcharge of 30 cents to packages delivered to homes. The delivery service is applying the charge to customers who send 40,000 packages a week and whose volume is 120 percent higher or more than their average in February. Oversized items will also include an additional fee.
A FedEx company spokesperson told The Wall Street Journal, “As the impact of Covid-19 continues to generate a surge in residential deliveries and oversized items, the peak surcharges will help us manage the demand while maintaining strong levels of service for our customers.”
The addition of surcharges may add more margin pressure for retailers that have seen profits take a hit as a larger percentage of their overall sales have shifted from stores to online since the onset of the coronavirus crisis.
Retailers, quite frequently, have eaten shipping surcharges as a cost of doing business in the past with the rationalization that online sales quite often represented an incremental gain on top of also strong volume at physical locations. The current reality, however, is that some retailers are trying to build up store sales while occupancy limits and social distancing rules remain in place.
- UPS adds ‘peak’ surcharge amid coronavirus fueled delivery spike – Reuters
- FedEx Adds New Delivery Fees to Manage Strain From Coronavirus – The Wall Street Journal
DISCUSSION QUESTIONS: How do you expect retailers to address coronavirus-related delivery surcharges being placed on them by UPS and FedEx? Do you think American consumers will accept higher product prices or delivery fees for online orders considering the circumstances?