UPS and FedEx shares jumped on August 11 after both companies said they are raising prices to boost profit and help manage the strong growth of B2C deliveries spurred by the Covid-19 pandemic. UPS plans to apply holiday season surcharges of as much as US$ 4 a parcel for shippers that send more than 25.000 parcels a week and whose peak-season volume is triple February 2020 level.
On the low end, the charge is US$ 1 a parcel for ground deliveries for shippers with volume at least 10 percent above February’s level. UPS, which skipped the peak-season fees in 2019, charged less than US$1 extra per package in 2018.
FedEx will increase international surcharges on select routes starting August 10. FedEx plans to apply holiday surcharges as well.
UPS, FedEx, and other couriers have been hit with strong growth in B2C parcels volumes amid the Covid-19 pandemic. Deliveries to homes can be more costly than those to businesses because there are typically fewer packages per stop and more distance between locations. Growing demand has given parcel companies leverage to increase prices.
“The peak surcharges reflect current market conditions caused by the pandemic, which includes consumer demand and available capacity,” UPS said to Bloomberg. The fees will “help balance the volume in UPS’s network so we can provide the best possible service.”
John Haber, CEO of Spend Management Experts, a package shipping consulting firm, said to Bloomberg that the companies that are going to be hurt by these surcharges retail companies are. They can least afford it at this point. Many retailers have turned to e-commerce as a lifeline while customers stayed away from retail stores because of the virus. Only strong platforms such as Amazon and Walmart will be able to absorb the surcharges without passing them on to consumers.