UPS Responds to Coronavirus Surge with Hefty Residential Fees

It’s everyone’s favorite time of year: UPS holiday surcharges are coming! For the first time since 2018, they’ll be charging a residential delivery fee for high-volume shippers—and it’s a hefty one.

With holiday shoppers likely to avoid crowded stores, UPS is preparing for a deluge of residential online shopping deliveries. They recently announced peak season fees of up to $3 for ground shipments and up to $4 for air shipments destined for residences.

Both UPS and FedEx chose to forgo additional fees on residential charges in 2019, and in 2018, they maxed out at 28 cents for ground and 99 cents for air shipments.

You can expect these charges to go into effect from November 15 to January 16, 2021, along with additional peak season surcharges.

Residential Delivery Fees

UPS structured these fees on a sliding scale depending on your overall shipping volume and how much it increases during the peak season compared to February of this year.

Who Will the Surcharges Affect?

Large shippers can expect to bear the brunt of these fees. The structure puts the burden on large retailers, like Amazon, Walmart and Target, who are also less likely to be affected by the sales slump caused by the pandemic.

It’s also important to note that these fees only affect customers who ship more than 25,000 packages a week at any point during the peak period. Those with a smaller volume of shipments won’t be charged, but be sure to note additional surcharges that might apply.

What Sparked the Increase?

COVID-19 has put a strain on shipping companies this year. Between additional safety measures, fewer cargo plane space and a surge of online orders, UPS and other carriers are facing an uphill battle.

In fact, UPS’s average U.S. volume climbed 23% in the second quarter of 2020 from the same time last year, according to Bloomberg. 

These charges are a way for UPS to boost profits and manage this new wave of residential deliveries. Delivering to homes is generally more expensive than those to businesses, with fewer packages per stop and more distance between locations.

The 2020 Holiday Shipping Season

What can you expect during this year’s holiday shopping season? The retail industry doesn’t really know. 

Last year, holiday e-commerce sales rose by 13.2% to $137.6 billion in the U.S. alone, according to eMarketer. And predictions for this year (before the pandemic) estimated another 13.9% increase year over year.

While 2020 predictions are likely far off due to COVID-19, UPS is putting their bets on an online shopping explosion.

Whether you’re predicting a boom or a bust, now’s the time to plan and prepare for these additional shipping costs. Reach out to one of our experts to see if these or any other peak season fees will affect your business.

The Reveel App uses AI and machine learning to provide an unparalleled look into what’s impacting your bottom line. Through invoice audits, peer benchmarking, and rate modeling/simulations, you can see the health of your operation and assess pricing changes from parcel carriers like FedEx and UPS. Sign up for a free Reveel account today to see how you can leverage automation to synthesize your data, ship more for less, and reduce the time needed to identify issues and action items.