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UPS Holiday Surcharge Increases Force Retailers To Rethink Last Mile Priorities

  • Written by  Glenn Taylor
UPS Holiday Surcharge Increases Force Retailers To Rethink Last Mile Priorities

UPS plans to charge retailers extra fees to deliver packages during the 2017 holiday shopping season, backing retailers of all sizes into a corner since they’re already paying the price to ship orders to consumers quickly and on time.

The fact is, consumers view free shipping (80%) and fast shipping (54%) as top incentives to purchase online, according to data from Walker Sands. In response, retailers have had to bolster their logistics strategies to remain relevant. Adding on to the pressure, 16% of consumers have used same-day delivery in the past year (up from 9% in 2016), so retailers cannot afford the risk of reducing or eliminating delivery efficiencies. At the same time, UPS is struggling to stay afloat as peak season shipping expenses cut into yearly revenue.

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So, as online retail and UPS fight over delivery costs, store-based retailers can benefit. The UPS surcharges don’t apply to store deliveries, so retailers now have an opportunity this holiday season to get their store-to-consumer fulfillment capabilities in gear, all while cutting costs.

“Retailers should insert a line just before checkout reminding the shopper that an in-store pickup during the holiday season makes sure their item arrives on time, puts control in their hands, and avoids the extra surcharge,” said Nick McLean, CEO of OrderDynamics, in an interview with Retail TouchPoints. “Best of all, since 58% of shoppers will purchase more items on a pickup, it not only saves the retailer, and improves the customer experience; it also helps a retailer increase sales revenue.”

‘Tis The Season To Turn Stores Into Distribution Centers

Additionally, the surcharges give retailers more incentive to use stores as distribution centers and optimize the last mile without the help of a major shipping carrier.

“These models, especially ship-from-store, are an ideal way to overcome these always-rising shipping costs by shortening distances between product and customer — essentially taking a far-away distribution center out of the equation,” said Tushar Patel, CMO of Kibo, in an interview with Retail TouchPoints. “We’ve found that on average, dealers are 47% closer to customers than warehouses or distribution centers. As well, our recent consumer trends survey report showed 66% of consumers say that providing multiple fulfillment options influences their willingness to complete their purchase. This includes in-store pickup and expedited shipping made financially possible by ship-from-store.”

As part of the surcharges, UPS will add 27-cent fees on all ground packages shipped residentially between Nov. 19 and Dec. 2 — the weeks encapsulating Black Friday and Cyber Monday. The peak surcharges won’t be in effect for the following two weeks, but they will return for the final holiday rush. From Dec. 17 to Dec. 23, UPS will charge an extra 27 cents for each ground shipment, 81 cents for next-day air and 97 cents for two- or three-day delivery.

For retailers seeing these changes as a threat against Amazon, keep calm. While Amazon is building out a vast delivery network of its own, the UPS surcharges still affect the e-Commerce giant since the two companies are delivery partners. Therefore, while many retailers may see the surcharges as yet another detriment to competing against the likes of Amazon and Walmart, these two top players still have to fork over the extra fees themselves.

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