Beware of Small Parcel Carriers’ Increased Holiday Surcharges
The Surcharge Model
Many small parcel carrier agreements (such as UPS and FedEx) outline Money-back Guarantees/Guaranteed Service Refunds for their ground and air service shipments. These are clauses in contracts that set terms for actualization of delivery dates. For instance, the carrier would agree to refund the cost of shipments that are late by a standard length of time.
While exceptions may apply at any time of year, it is typical for small parcel carriers to write blackout dates into their contractual agreements with marketers for the weeks leading up and following Thanksgiving, Hanukah, and Christmas.
These blackout dates refer to specific times of the year in which they suspend their Money Back Guarantees or Guaranteed Service Refunds.
It is important for marketers to be aware of this when developing seasonal ad campaigns as most ecommerce companies try to push back guaranteed delivery when customers order prior to Thanksgiving/Hanukah/Christmas as close to the holiday as possible. Parcels may not arrive in time if the carriers are overwhelmed by more volume than they can handle. And there is no monetary recourse for the marketer if that should occur.
To better conceptualize how pervasive the issue is, we need only look to Federal Express and the United Parcel Service. Both are household brands in part because of their size and reach. Thus, the argument can be made that these brands rest on an infrastructure capable of handling peak-season volume. Still, in 2017, both entered into shipping agreements that compounded the effects of surcharges when they exempted themselves from delivery date responsibilities on and around holidays.
Fed Ex’s Guarantee Exceptions
- If packages were delivered within 90 days of the promised time on Valentine’s Day, the Friday before Mother’s Day, and the Wednesday before Thanksgiving, claims for a refund would be denied.
- Between 12/18 and 12/23, as long as shipments were delivered by end of a promised day, claims were denied.
- Money Back Guarantees were suspended completely for ground shipments between Thanksgiving and Christmas.
UPS Guarantee Exceptions
- Suspended all Money Back Guarantee for ground shipments between Thanksgiving and Christmas
- On the Wednesday before Thanksgiving and throughout the week before Christmas, UPS extended its guaranteed delivery time to 90 minutes for Next Day Air Early and Worldwide Express Plus service.
- For all domestic and international air services, delivery times were pushed to end of promised day.
Doubling Down on Holiday Profits
Let’s not forget, waivers like those listed above run parallel to surcharges already in place. FedEx bumps additional handling by $3 (25%) during peak season, a number that is further inflated for oversized and unauthorized packages.
At the end of the day, marketers must acknowledge and accept the imperfection of shipping around peak seasons. However, they should not settle for carriers that exploit these inevitable mistakes or late deliveries.
It is important to remember that UPS and FedEx are publicly traded. They are in the business of driving up their share price and peak seasons provide a unique opportunity for increased earnings.
So what can you do as a marketer? Defend your brand by doing your due diligence. Here are some steps you can take in your relations with small parcel carriers:
Do your homework!
This means reading the fine print on your contracts and comparing terms with those of privately owned and operated shipping carriers. Having this knowledge and context will allow you to lay out clear expectations for your carrier on how your product should be handled. You will also have more leverage to hold carriers accountable for Money Back Guarantees and refund promises during the entire year to offset blackout dates if you are well versed in all the fine print of the contract.
Expand the period that you provide holiday specials.
The further in advance of the holiday that the item can be ordered, fulfilled, and delivered, the more time the entire supply chain has to accomplish that goal. The marketer’s costs will be lower, there will be less chance of errors, and less likelihood that a customer’s order arrives past the holiday. Missing the holiday is the scenario that you want to avoid at all costs. If a marketer sells their targeted amount of sales for the season, it does not matter whether they were sold over 3 months (Q4) or within the 4 weeks between Black Friday and Christmas. It’s the same dollars. As ecommerce sales continue to grow, this mindset is paramount.