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United Parcel Service Inc. UPS + 7.57% plans to impose hefty fees on major skippers during the holiday season, reflecting the added complexity and cost of an expected crunch of online orders amid the coronavirus pandemic.
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The fees will affect the ability of major retailers such as Amazon.com Inc. and Target Corp. TGT + 1.83% test to offset costs during a holiday season, as they are likely to be more dependent on online orders, with shoppers scurrying across plenty of stores.
UPS said on Friday that the fees could pay a total of $ 3 a package for shipping land and other shipping options for lower price and up to $ 4 a package for air versions bound for residences.
That is significantly higher than the last time UPS imposed additional fees in a full holiday season, in 2018. Surcharges then reach 28 cents on ground shipments and up to 99 cents for some air shipments.
The newly planned fees come as UPS and rival FedEx Corp. try to compensate for significantly higher costs from the influx of packets streaming through their network.
| Ticker | Security | Last | Change | Change% |
|---|---|---|---|---|
| UPS | UNITED PARCEL SERVICE INC. | 156.90 | +11.43 | + 7.86% |
They have already charged extra fees for large skippers, and have increased prices on some customers through bilingual rates.
Shares of both companies received a boost on Friday. Investors hope that after years of investment, delivery companies could squeeze higher customer prices to expand and modernize their delivery systems.
Shares in UPS rose 3.6% in early trading to $ 150.77, while FedEx shares jumped 2.7% to $ 176.82.
In an internal document circulating before the warehouses were made public, UPS told its sales team that the fees would offset higher costs to hire new workers and secure additional air, truck and rail capacity.
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“This surcharge helps protect our network and ensure that UPS is adequately compensated for additional costs incurred to maintain our high quality service,” according to the document, which was reviewed by The Wall Street Journal.
The new charges come after UPS’s new chief executive, Carol Tomé, recently said the company would take a more aggressive approach to raising prices at large retailers to manage capacity.
“While retailers may spit on price increases that come their way, large retailers have a way of spreading that and no one knows,” said Ms. Tomé, who previously served as chief financial officer at Home Depot Inc., on ‘ the company’s call last week.
Shipping consultants expected the holiday pay to be steeper than before, but were surprised by how high UPS goes.
“This is devastating for retailers,” said John Haber, CEO of supply chain consultant Spend Management Experts Inc. “It got to a point where I started to consider it as goofy.”
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A FedEx spokesman had no immediate comment. Business leaders have said they are evaluating plans for additional fees throughout the season. “This is part of the new normal,” FedEx Chief Marketing Officer Brie Carere said in late June.
In the past, during the holidays, the company did not charge for home deliveries and instead worked closely with shippers to manage expected shipping during the busiest times. It has accounted for more voluminous packages during peak periods.
UPS said its fees will apply from mid-November to mid-January. They are designed to apply only to customers who ship more than 25,000 packages per week, with the fees increasing based on how much higher the weekly shipping volume is compared to the customer’s average weekly deliveries from February to February. That month is seen as a baseline because it was before the pandemic bought up and shipped cartridges.
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Start-up costs are $ 1 for ground transportation and $ 2 for air. The company said it would also include surcharges of $ 5 for shipments that require additional handling and $ 50 for large items.
A UPS spokesman said the upsets reflect the available capacity to handle and ship packages.
UPS encourages customers to adjust their operations to avoid the hassle of fees. According to the internal document, some of these steps include shifts of promotions during the holiday season, so that volume does not peak too much during the busiest times, such as Thanksgiving, and entices shoppers to take orders in stores or to deliver packages to access to get points such as dry cleaners, drugstores or other local businesses.
“These strategies help UPS to reduce disruptions in our network, maintain a steady flow of volume throughout the entire season and can reduce financial impact of the surcharge for our customers,” according to the document.
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