UPS Inc. (NYSE:UPS) has disclosed its delivery surcharges for the upcoming holiday delivery season, and very big shippers will not be pleased.
The holiday surcharges, which kick in Oct. 31 and run until Jan. 15, will, as they did in the 2020-21 cycle, whack UPS shippers that tender the highest volumes. In extreme cases, surcharges will run as high as $6.15 per package, according to a memo posted Tuesday on UPS’ website. The peak surcharges were disclosed earlier than they. have in past years.
This year’s surcharges will apply to customers who have shipped more than 25,000 packages during any week following February 2020, the last month of normal parcel-delivery volumes before the COVID-19 pandemic struck with full force in the U.S. The weekly package threshold is pegged to the combined volume of all residential air and ground volumes, as well as parcels moving via the company’s alliance with the U.S. Postal Service, called SurePost, in which the Postal Service delivers on behalf of UPS direct to mailboxes.
As they were last holiday, the specific surcharges will be based on how much a shipper’s weekly volumes during the holiday peak will exceed its average weekly volumes during February 2020.
For example, a shipper tendering weekly peak volumes that are 110% to 200% above its average weekly volumes in February 2020 will pay $1.15 to $2.15 in per-package surcharges, depending on the UPS product it uses.
The surcharges will escalate in tandem with volumes, culminating with fees as high as $6.15 per package for shippers whose weekly peak volumes will exceed 500% of February 2020 volumes.
For shippers with peak volumes that will run 200% to 400% higher compared with February 2020, the surcharges are roughly 15 cents per package higher than they were last year. The mega-shipper tiers that start at package volumes exceeding 400% of February 2020 traffic and go up above 500% are new for UPS and its customers this holiday.
Customers tendering large and outsized shipment will take it on the chin twice before the year is out. Effective July 4, shipments requiring “additional handling” will rise to $3.50 per package from $3. Effective Oct. 3, that fee will jump to $6 per package. The fee will expire Jan. 15.
Surcharges on large packages, defined as shipments whose length exceeds 96 inches or a combined length and girth of more than 130 inches, will rise to $40 per package on July 4 from the current fee of $31.45. They will then surge to $60 per package on Oct. 3 and stay there until Jan. 15. The large-package surcharge will be $10 more than last holiday season.
Surcharges on shipments designated as over the maximum limits for UPS carriage will be set at $250 per package, effective Oct. 3. UPS currently doesn’t impose surcharges on those classifications. However, consultancy Shipware LLC estimates that UPS’ list price for handling those shipments is about $920, meaning the company charges enough for the service so that surcharges are typically not needed. UPS and other parcel carriers charge higher rates to try to discourage those types of shipments that should travel via modes other than parcel.
In an email late Wednesday, Shipware founder and Co-CEO Rob Martinez called the scope of increases “outrageous.” Martinez said UPS can no longer convincingly argue that the charges are designed to offset higher costs to serve during the pandemic because it has roughly doubled its operating margin in the past 15 months.
UPS CEO Carol B Tomé has said the company is focusing more of its efforts on serving higher-margin small to midsize (SMB) customers. Conversely, less time will be spent attending to the needs of enterprise customers, many of them UPS shippers for decades, because their large volumes don’t achieve the profitability that Tomé demands. Since last fall, there have been stories of big UPS shippers being told to accept significant rate increases or find other delivery partners.
An increasing number are turning to smaller parcel-delivery firms that have historically operated in specific regions of the country. In response, regional firms like Lone Star Overnight and LaserShip are expanding the number of states they serve and deepening geographic coverage in their existing state networks.