UPS holiday surcharge forces stores to delay shipping and shift to FedEx
Retailers are contending with a new challenge as this year's holiday shopping season heats up: Extra shipping fees during the busiest weeks.
United Parcel Service, Inc. for the first time is tacking on a surcharge on packages shipped to homes around Black Friday and the week before Christmas, hoping to convince companies to send their orders outside those peak periods – or to make more money from ones that must be delivered then.
The surcharge has prompted ecommerce retailers large and small to consider other delivery options, such as FedEx Corp. or the US Postal Service, passing the additional costs to their customers, or delaying shipments to cheaper times.
Jeffrey Gornstein, president of home and garden site Comfort House, is one retailer who isn't using UPS as much this holiday season.
He declined to say how much he anticipates saving by switching some orders to other carriers, a change he began making in October. He saw the added fees as another challenge for smaller retailers. "Carriers implementing surcharges are punishing small merchants at the expense of larger e-commerce players," Mr. Gornstein said.
UPS expects the surcharge, which went into effect on 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 Atlanta-based carrier expects it will deliver more than 30 million packages daily on 17 of the 21 delivery days (between Thanksgiving and Christmas in the US.
Last year, UPS said exceeded that level on just 11 days over the same period. It sees the change this year as evidence that the surcharge is successfully evening out its volume.
Greg Brown, president of UPS's retail sector, said the company has been working with businesses to try to identify what orders placed during peak periods may not need to be rushed out the door. Many electronics, toys, sporting goods and clothing, for example, are Christmas gifts that don't need to be delivered right away. That can help retailers avoid bottlenecks, both in UPS's network and in their own warehouses.
"I don't think it's going to change buying patterns dramatically," said Mr. Brown. "What we're trying to help retailers do is shape demand a little bit."
Retailers are also attempting to adjust customers' expectations. Macy's Inc., which ships exclusively through UPS, is for the first time 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.
Macy's tested the shipping option in some markets a year ago and more broadly during Mother's Day and Father's Day this year and said a "fair percentage" of customers signed up.
"More often than not, it is more of a 'want' basis instead of a 'need' basis," said Scott Prieto, Macy's executive vice president of logistics and operations.
Macy's will offer the delayed shipping option for several days around Black Friday, when Mr. Prieto said Macys.com orders can be 10 times what they are on a typical weekday, and in the week before Christmas. (WSJ)