Every year prior to peak season, fulfillment companies pay attention to shipping carriers as they announce their holiday surcharges and shipping deadlines for both domestic and international.
Ecommerce Magazine wrote “Typically, online order shippers like U.S. Postal Service, FedEx, UPS, and DHLeCom have added a Peak Demand surcharge to fees in the holiday season. Those charges initially applied to packages being shipped after the Thanksgiving holiday and stopped before the New Year’s Day holiday. With shoppers buying online gifts earlier, surcharges have also started earlier too. Now they often apply as early as the beginning of October for some e-commerce shippers.”
The larger the shipper, the higher the surcharges are during the Peak season. With the UPS/FedEx Duopoly, levies could go up to $7 per package depending on the volume shipped and service type. With this in mind, retailers may need to review marketing efforts such as “Free Shipping” in an effort to understand how the additional fees will affect margins.
The Impact on eCommerce
E-commerce sales skyrocketed during covid and haven’t slowed down. In 2022, shoppers are returning back to the storefronts. However, according to Ware2Go, approximately 81% of shoppers are planning on buying at least some of their holiday gifts online this holiday season. So it becomes all the more important to fully understand the additional costs and their impact on your bottom line during this holiday season.
To add to the confusion with the Duopoly, what used to be called Peak Season/Holiday Surcharges, has been changed in wording to Peak/Demand Surcharge. This will apply surcharges differently depending on the time of year, however, the higher surcharge fees are typically charged during the holiday season from October to January.
When Do Peak Season Surcharges End?
Carriers are now applying Peak/Demand surcharges long after peak season. They have extended surcharges into the new year to include the “return season“.
Lastly, don’t be confused as there’s a difference in the annual General Rate Increases (GRI) and Peak Demand Surcharges. Traditionally GRI’s are actually fixed rate increases and applied at the beginning of each year and by all carriers. They stay in place until a review of freight charges is done for the following GRI year. They can range anywhere from 4-12% depending on the carrier.
Leveraging a 3PL
How can outsourcing order fulfillment help reduce carrier surcharges?
Due to the package volume that 3PLs ship annually, they are able to negotiate lower shipping rates. In addition to receiving better rates, advanced 3PLs use technology to “rate shop” carriers. Rate shopping will not only include the legacy carriers but smaller regional carriers. By rate shopping, a 3PL can find a lower rate that has an equivalent shipping time as a legacy carrier.
AMS Fulfillment leverages rate shopping technology to ensure that our clients receive the best possible rate for the shortest shipping time available – thereby saving our clients money and time.
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About the Author: John Bevacqua is the creator of the “Freight Freak” monthly blog, and former VP of Logistics at AMS Fulfillment. He currently serves, in semi-retirement, as Logistics Advisor.