Amazon last year raised its free-shipping minimums, only to eventually lower them again this year. Like any business, it's sensitive to the cost of carriage.
So don't be surprised if you see costs jump toward the end of the year. And, if so, you'll probably be able to thank UPS. The shipping giant announced yesterday its holiday gift for retailers and consumers alike: a lump of coal.
UPS announced that new peak surcharges -- the shipping equivalent of Uber surge pricing -- are now in place:
At various times throughout the year, including the November and December holiday season, UPS must flex its delivery network to meet increased demand. To help enable UPS to continue to provide best-in-class value to customers while offsetting some of the additional expenses incurred during significant volume surges, UPS will begin implementing Peak Surcharges in 2017.
The surcharges and dates vary with the type of service involved. Surcharges apply to each package picked up and delivered. So if a business has UPS pick up a package from its location and then deliver it to the customer, there is a double surcharge involved. Below is the table of services, surcharges, and surcharge dates from UPS.
UPS Ground starts $0.27 surcharges before Thanksgiving, runs them through December 2, and then again from December 17 through December 23. In that last period, UPS 2nd Day or 3rd Day gets a $0.97 surcharge, while the surcharge for the UPS next-day services is $0.81.
According to The Wall Street Journal, large packages will be hit with much higher surcharges, with the biggest individual shipments taking a $249 extra charge on top of a $150 oversize cost.
For big companies, this is going to hurt. Amazon, Target, Walmart, and other big shippers easily could send millions of packages, the surcharges for which will add up to a tidy sum. For smaller companies, it could hurt even more, according to The Wall Street Journal.
Patrick Gill, chief executive of the high-end fishing gear site TackleDirect.com, said news of the surcharge was frustrating since it is going to be applied when his site needs lower rates to compete against Amazon.com, Walmart stores, and others. "This will add up to be another unaccounted for expense during the holiday season," Gill said. "It will force us to push some product away from UPS in some cases."
In a world of competitive pricing, companies other than Gill's may find themselves looking for alternatives. Amazon, for example, already does business with many other carriers, including the U.S. Postal Service and FedEx. The question is how much of the shipping could be moved over to others and whether they would look for surcharges as well.
The basic problem is one of predictability. Shippers have to plan capacity. When business ramps up quickly, so does the need to obtain extra trucks, planes, and personnel on a seasonal basis. Particularly for the equipment, that is not so easy. The surcharges may be to offset the additional costs of providing the same type of service as UPS usually does.
Another possibility will be to get consumers to pick up purchases at stores or, as Amazon does, at locker locations, which could avoid at least one part of the surcharge. Or consumers may see more deals in October in an attempt to drive early shopping and shipping. Christmas in October: What a novel idea.