UPS to Surcharge Retailers for Unexpected Peak Order Volume

Industry Insight, Partners

If Santa checks his list twice, retailers are going to want to check their calculations twice as well – UPS recently announced that this holiday season, the company will be dish out a surcharge to retailers that cannot accurately forecast how much merchandise they plan on moving.

This year has been characterized by increases in shipping and handling fees for retailers, with UPS, FedEx and other carriers raising their prices while also introducing new charges, such as dimensional weight pricing that penalizes retailers for sending goods in oversized boxes. As Internet Retailer noted, many retailers witnessed a sharp increase in the price of their eCommerce operations as a result, particularly businesses that specialize in large, lightweight objects such as picture frames.

Preparing for the storm

With the holidays just a few months away, UPS has turned to the peak sales season as another potential revenue-driving opportunity. In years past, UPS and other carriers have fallen woefully behind schedule due to numerous variables, ranging from snowstorms that hinder transportation to sudden increases in demand. To make the delivery process as smooth as possible, UPS will be working with retailers to try to anticipate demand for the upcoming holiday season. However, UPS will be penalizing retailers that cannot accurately forecast their demand with surcharges.

“We don’t discuss the individual customer pricing, but we do have comprehensive peak pricing initiatives underway to increase revenue from the customers that surge and ultimately drive significantly greater cost at peak,” Alan Gershenhorn, chief commercial officer at UPS, said on an investor call. “We are going to continue to address peak on a customer-by-customer basis, really understanding what their needs are, the value of the solutions and market conditions and price them accordingly.”

Nearly 200 of the top 500 eCommerce sites utilize UPS as their primary carrier.

These surcharges could affect a large portion of online retailers, with Internet Retailer reporting that nearly 200 of the top 500 eCommerce sites utilize UPS as their primary carrier.

Anticipating sales in advance

For many merchants, the holidays remain a pivotal timeframe, as they make most of their annual sales during the last two months of the year. While retailers can easily anticipate a seasonal increase in demand for the holidays, trying to pinpoint with accuracy how many sales they will garner can be a more complicated matter. Even slight variables, such as stocking an item that winds up being more popular than anticipated, can throw forecasts off by a significant margin.

While there are no easy answers that will help merchants pinpoint precisely how many sales they will make during the holidays, better customer information can help significantly in that regard. Customer information management and detailed profiles can help retailers identify purchasing trends and patterns and give merchants additional insight into whether they will make purchases from the seller during the holidays, and if so, how much they will spend. This may help online sellers avoid costly surcharges from shipping more goods than anticipated.