Last week United Parcel Service Inc. (UPS) announced new holiday-season surcharges on packages delivered during peak times. Though this pricing change certainly has an impact on retailers, it should come as no surprise. UPS ships roughly 30 million packages per day during peak holiday season, 11 million more than on regular days. According to UPS chief commercial officer Alan Gershenhorn, UPS has increased their operations “to process near double our already massive regular daily volume.”
Each year, UPS hires 95,000 seasonal workers to accommodate these “exceptional demands” on their business. UPS also notes that holiday packages tend to be larger and heavier than packages delivered throughout the rest of the year. As it is, UPS, like many other national employers, are struggling to fill regular full-time positions. According to Slate, one of UPS’s biggest facilities in Louisville, Kentucky already has 30,000 unfilled job openings. Exceptionally high demand paired with a staff shortage is a recipe for disaster. It is likely UPS will use the surge pricing to offer more competitive wages to employees.
The surge pricing will mostly impact ground residential shipping. From November 19th – December 2nd and December 17th – December 23rd ground shipping will increase by 27 cents per package. Second and third-day air delivery will increase by ninety-seven cents per package December 17th – 23rd. Next day air will be eighty-one cents more during that same time.
In our increasingly transparent economy, surge pricing is becoming the new norm. From Uber, flights, hotels, weekend menus at restaurants, and evening tickets at the movies, almost every product or service is more expensive when in higher demand. It makes sense for UPS and retail to get on board. It is likely consumers won’t object, or even notice this slight change. However, as retailers, there are some strategies you can take to smooth over this transition while protecting your bottom line and the customers’ best interests.
Requiring a minimum order for free shipping is an effective and consumer-friendly strategy for offsetting peak shipping costs. Orders around the holiday season are higher than average. So for most shoppers, meeting the minimum won’t be problematic.
In-Between Surge Sales
Plan your biggest promotions for December 3rd – 16th, the two weeks in December when there is no surge pricing. This will not only help avoid the extra costs but also help even out sales between Black Friday and the week before Christmas.
Offer free shipping as a reward for signing up for a newsletter or rewards program. Though you will front the shipping costs, it is a small investment in exchange for gaining a long-term customer.
Another option for retailers is to find other shipping service providers. Historically, UPS and FedEx mirror each other in pricing. However, FedEx has not announced a holiday surcharge. The United States Postal Service (USPS) also has affordable rates and reliable service.
The holiday season is a stressful time for shoppers and retailers alike. Getting the right item to the right person on time is your customer’s first priority. Making that process as straightforward and hassle-free as possible will win them over, even if they have to pay a little extra.