News Feature | June 29, 2017

Newly Mandated UPS Surcharges A Result Of The ‘Amazon Effect'

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UPS Announces New Delivery Surcharges For Black Friday and Christmas orders.

UPS has announced it plans to charge retailers extra fees for Black Friday and Christmas orders to cope with the explosion of online shopping -- especially around the holidays. These surcharges are a result of the “Amazon effect,” and will affect all major retailers who rely on ecommerce sales to help boost revenue.  Retailers will be forced to choose between passing these surcharges along to the customers or find other ways to reduce overhead to keep their profit margins acceptable. Surveys have already shown that customers have come to expect not only fast delivery options but also increasingly expect free or low-cost shipping options and easy and free returns.

According to the soon to be released 2017 Walker Sands Future of Retail Study, 40 percent of consumers did a majority of their holiday shopping online in 2016 and that number is only expected to rise. That means that however retailers decide to handle these surcharges will have a significant impact on their bottom line. This decision highlights UPS is not only feeling the pinch from the growth of e-commerce, but the repercussions of the Amazon effect as well.

And due to the heightened expectations set by Amazon Prime -- a service used by 55 percent of consumers -- free shipping (80 percent) and fast shipping (54 percent) are the top incentives for consumers to purchase more online. What’s more, 16 percent of consumers have ordered something for same-day delivery in the past year (up from 9 percent in 2016), forcing retailers to implement a fast and cheap logistics strategy to remain relevant in the space.

With more retailers offering consumers cheap and speedy delivery options, it’s no surprise that UPS is raising prices to deal with this logistical nightmare. Some analysts also anticipate that FedEx and other delivery carriers will follow UPS’s example and impose holiday delivery surcharges to help cover the costs of additional staff and vehicles to handle the extra demand.