UPS plans to levy higher holiday shipping surcharges on some of the biggest retailers that send out tens of thousands of packages a week.
UPS already has peak surcharges of 30 cents per package through Nov. 14 on ground residential shipments from those large corporate customers shipping significantly more packages. The company added surcharges earlier this year during a surge in demand driven by stay-at-home orders due to the coronavirus pandemic.
Now, the company says its customers that send more than 25,000 packages a week to consumers will have to pay additional surcharges of $1-$4 per package if they exceed their regular volume. The fees will apply to ground residential and SurePost shipments, next day air residential and other air shipments to residences.
The $3- and $4-per-package surcharges are for those big customers -- companies such as Amazon, Target and Best Buy -- that ship more than 200% or 300% of their February volume during the height of the holiday shipping and returns period from Nov. 15 -- Jan. 16.
Late last month, UPS CEO Carol Tome, a former chief financial officer at Home Depot, said during her report of the company's financial results that large retailers have a way to spread out higher costs across their merchandise.
"When cost increases come your way, if you are a large retailer, you can pass those cost increases (across products), and the customers don't know," she said. At UPS, "there's an opportunity on the pricing side to do what we need to do."
UPS is coping with rising costs for shipping its ever growing volumes of packages to doorsteps. Competitor FedEx announced new surcharges on certain international shipments last week.
John Haber, CEO of Atlanta-based supply chain consulting firm Spend Management Experts, said many retailers are already "fighting for survival," adding that "some of these costs are going to have to be passed down."
Cowen analyst Helane Becker in a note to investors called UPS's approach on pricing "a very positive development," noting that "Demand is so strong."
UPS has also spent years working to fine tune its handling of the annual surge in holiday volume. If it unexpectedly gets overloaded by last-minute online shoppers, that can lead to delays in the most crucial period leading up to Christmas.
High surcharges can deter retailers from putting in a surge of orders with UPS, prompting them to instead use promotions to encourage consumers to order items earlier or to turn to multiple shipping companies to get packages out during peak periods.
Other UPS surcharges are already in place on international shipments and large items like furniture, with surcharges on large packages increasing for the holiday peak period.
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