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Peak season surcharges in 2020: What to expect and how to manage them

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With the holiday season right around the corner, businesses are now gearing up for the busiest period of the year. One of your biggest considerations? New surcharges and shipping fees that can add a considerable amount to your shipping costs.

Ecommerce sales have skyrocketed as a result of the COVID-19 pandemic. However, this is both a blessing and a curse for merchants and retailers. While healthy sales are reassuring, it means that peak season surcharges are likely to have more of an impact on your operation this holiday season.

What are peak season surcharges?

Peak season surcharges (PSS) refer to the increases that carriers apply in addition to their base rate during periods of higher demand. This shouldn’t be confused with a general rate increase (GRI) which recognizes a longer-term rise in operational costs. 

Peak season surcharges are usually added on as a flat fee per package, and differ depending on which carrier you’re using. The size of surcharges will be determined by factors such as:

  • Destination
  • Priority/service level
  • Size/weight
  • Additional handling

Carriers usually announce seasonal surcharges around six weeks before they go into effect. Technically speaking, peak season surcharges can be brought in at any time, though it typically happens in the lead-up to the holiday season. 

Why do peak season surcharges exist?

The demand for shipping and freight isn’t uniform, but cyclical. Rather, major holiday events such as Black Friday and Cyber Monday create huge spikes in consumer demand – and a corresponding increase in the need for shipping services. 

Because carriers are constantly working at or near full capacity during the holiday season, this leads to increased costs in the form of seasonal employees or automation to meet demand, which is then passed onto the customer.

What to expect for the 2020 holiday season

It’s safe to say that the 2020 holiday season is going to be like no other we’ve seen before. 

With the in-store retail sector heavily impacted due to COVID-19 restrictions, consumers were forced to pivot to online shopping. Although the majority of stores have now reopened, many consumers still feel cautious about venturing into stores. 

This has meant that high demand in the eCommerce sector has continued almost unabated – right as we head into the busiest period of the year. 

Due to the pandemic, carrier networks have already hit the peak season volumes expected during the actual holiday season. As a result, merchants have already had to weather the introduction of new surcharges. UPS, FedEx, DHL, and USPS levied new fees on residential deliveries as they tried to manage the surge in small parcel volumes. 

This has made volume forecasting for the 2020 holiday season immensely challenging for carriers, and has had a knock-on effect on peak season surcharges. With bigger operational costs continuing, this has meant higher than expected surcharges. Many carriers are also keeping surcharges in place for much longer than previous years – in some cases as late as January 17th.

Even more significantly, the 2020 holiday season has seen other carriers apply peak season surcharges for the very first time – USPS set a huge precedent with its first-ever seasonal surcharges, due to take effect on October 18.

How to manage peak season surcharges

In this ever-changing landscape, it’s never been more important to manage peak season surcharges effectively. Although it’s hard to avoid them completely, here are some steps you can take to minimize their impact: 

Compare different carriers

Carriers will publish their surcharges on their websites, which allows you to compare rates between different providers in advance of the holiday season. It’s important to remember that the cheapest rate doesn’t necessarily mean the best service; keeping this in mind will help you to choose the best value carrier for your needs.

See here to compare the peak season surcharges between USPS, FedEx, and UPS.

Be prepared for changes

Although there aren’t any more surcharges on the horizon at present, the uncertainty presented by COVID-19 means that longer-lasting surcharges could become the new normal. Just like merchants, carriers themselves are still trying to get to grips with what the pandemic will mean for their business models – and that means keeping an eye out for price changes to avoid getting a nasty surprise.

Consider working with an expert fulfillment partner

This year’s peak season surcharges are proving to be more complex than normal, with lots of fine print and differing volume thresholds to be aware of. At such a challenging time for the shipping sector, it’s highly advantageous to partner with an experienced fulfillment provider like Whiplash who can help you to build a successful and flexible shipping strategy that manages peak season charges effectively. 

This way, you can capitalize on the revenue opportunities of the holiday season without losing the profitability of your business.

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