UPS Hits Retailers With Holiday Shipping Fee Surprise

With the holiday shopping season in full swing, retailers are facing a new challenge: extra shipping fees during the busiest weeks.

The Wall Street Journal reports that United Parcel Service (UPS) is adding on a surcharge to packages shipped to homes around Black Friday and the week before Christmas in a move to compel retailers to send their orders outside those peak periods.

The surcharge has prompted eCommerce retailers to consider other delivery options, such as FedEx or the U.S. Postal Service (USPS). They might also simply pass the additional costs on to their customers, or delay shipments to cheaper times.

UPS expects the surcharge — which went into effect Nov. 19 and lasts until Dec. 3, then returns mid-December — to smooth out the volume of packages it delivers during the holiday season. The carrier expects to deliver more than 30 million packages daily on 17 of the 21 delivery days between Thanksgiving and Christmas in the U.S.

The surcharge tacks an additional $0.27 onto ground packages shipped during the peak period around Thanksgiving and Black Friday, ending December 2. The week before Christmas, steeper fees go into effect, starting at $0.27 for ground orders and increasing to $0.97 for packages delivered in two and three days.

While Moody’s has forecasted UPS could generate up to $200 million in revenue from the peak surcharges, the parcel service has declined to say how much it expects to make. It has, however, already set plans to raise those fees during next year’s holiday season.

Greg Brown, president of UPS’s retail sector, said the company has been working with businesses to identify which orders placed during peak periods may not need to be shipped right away, such as electronics, toys, sporting goods and clothing.

“I don’t think it’s going to change buying patterns dramatically,” said Brown. “What we’re trying to help retailers do is shape demand a little bit.”

In the meantime, retailers are trying to prepare their customers. For example, Macy’s, which ships exclusively through UPS, is offering “no hurry shipping” this holiday season, giving all online shoppers the option of longer delivery time in exchange for “Macy’s Money” that can be applied to future purchases. It’s similar to Amazon’s “no-rush shipping.”

FedEx isn’t adding peak-period surcharges but, like UPS, it is tacking on extra fees for oversize packages shipped during the holidays. The U.S. Postal Service, which hasn’t added additional charges, expects to deliver more packages because of UPS’s move and will be monitoring its network to see if there is a bump.