During peak season, order volume increases for most ecommerce businesses. With more orders shipped there is a natural increase in overall shipping costs as well.
In recent years shipping surcharges have risen significantly adding to the increase in shipping costs. Plus carriers are adding more surcharges, more often than in the past. This is due largely to the COVID-19 pandemic and the rise in ecommerce shopping which results in a higher number of packages even during non-peak times.
Ecommerce businesses need to plan for many aspects of the holiday season: inventory forecasts, marketing promotions, sales strategies, specialized fulfillment projects like gift wrapping. But many forget to consider how peak season surcharges will affect their overall holiday budget.
Here are a few ways ecommerce merchants can make sure they are prepared for peak season transportation costs and surcharges.
Understand Every Line of Your Shipping Invoice
The best defense against surprise shipping fees is understanding everything you’re getting charged for—this includes the base transportation fee, all service fees, fuel rates, regular surcharges, and peak season surcharges as well.
By understanding all of your transportation fees year-round, you’ll be better equipped to plan for a rise in costs during peak season. It’s important to forecast what your transportation fees will be so that you have a ballpark understanding of what your bill will look like. Surcharges are a bit of a wild card, as they can be a flat rate, or a percentage, making them hard to account for in forecasting. Leave cushion for surcharges based on year’s past, and don’t be alarmed when surcharges get higher than you anticipated.
If you work with a 3PL or other shipping partner, they can help you understand your shipping invoice and any changes you might see. A 3PL will have close relationships with all the carriers they work with and be able to reach out to a carrier representative for any updates or clarification.
It’s important to set the expectation with your 3PL (or carrier representative if you work directly with them), that you want to be updated any time there is a change to your shipping fees.
Understand the Surcharges
In September or October of each year the major carriers publish most of the peak season surcharges. Surcharges are additional fees that apply on top of the transportation base rate, fuel rate, and service fees.
Peak season surcharges have historically been applied to the time between Black Friday and Christmas—the busiest shopping season of the year. Carriers implement these extra fees to offset the extra labor and infrastructure (trucks, equipment, etc.) needed to process a much larger volume of packages in a short period of time. Recently, surcharges have been added all year long, whenever there is a significant spike in volume or rising costs (like the market price of fuel).
Most surcharges are only effective for a finite time period, but some are listed as indefinite. Merchants need to remain proactive about reading the fine print and looking out for additional surcharges to be added at any time.
In order to best prepare for the upcoming holiday season, look at what surcharges your carrier added last peak season, and what they’ve added since. Often when one major carrier adds a surcharge, the others will add similar ones shortly after (changes to DIM weight factor is a good example).
Surcharges vary widely and they largely depend on the services you use. For example, a peak season surcharge may be added for delivery or pickup to certain zip codes—if you already have delivery area surcharge on your bill, you’ll likely see that section of your shipping costs go up as well.
Understand How Fuel Rates Contribute
What many ecommerce merchants may not realize is that the fuel charge on their shipping invoice is rarely a fixed fee or flat rate. Fuel is a very costly part of shipping and transportation and to make sure they aren’t losing money on fuel carriers change the rate that they charge for fuel weekly (sometimes monthly). Peak season is a time when carriers increase their fuel rates quite a bit.
Read our tutorial on how different carriers calculate their fuel charges (they’re all different!).
On top of the regular fuel rates, carriers often add fuel surcharges. These are some of the most aggressive surcharges that carriers add, because of the cost of fuel. There isn’t really a way to eliminate fuel surcharges from your invoice, only to know they will happen. Merchants should to be prepared to absorb them into their overall transportation fees.
“Fuel surcharges hit a lot of services. They affect the base fuel charge, residential surcharges, delivery area surcharges, and more. And they can really add up. It’s so important to look at how fuel charges will affect the services you use.”
Optimize Your Box and Packaging
Packaging is so important when it comes to shipping costs. A box that is just an inch wider will end up costing you extra. Multiply that extra 50 cents by a higher volume of orders and you’re looking at a huge cost difference.
Surcharges can be added to any part of your shipping costs. For example, certain box sizes may incur a surcharge. If you can get your product into a smaller box, you’ll be on the savings side of that cost difference.
It’s important to optimize your shipping packaging in August or September to implement and order the right number of boxes to match your order forecast.
Follow Shipping Experts Online
When carriers update their shipping rates or add surcharges, they don’t have an obligation to tell shippers. It’s why so many merchants get stuck with a huge shipping bill that they don’t see coming.
Being proactive is the best way to stay ahead of peak season surcharges. One of the best ways to be proactive is to seek out reliable information on your own. Follow consultants and third-party industry operators who post about carrier updates. It’s best if you find a platform that posts updates that include your carrier and other aspects of shipping that directly relate to your brand.
If you have this information coming to your feed daily, you’re more likely to catch new information quickly than having to spend time seeking it out. Carrier websites are a good second alternative. While they should be the source of truth for surcharges, carriers often bury information and it can be hard to decipher what relates to you and what doesn’t.
Working with a 3PL is the best of both worlds. Rely on their transportation team to get the best updates, and relay them to you when you need to know them the most.
“I look online almost every day for new surcharges during peak season. If you’re an ecommerce company you must have a good carrier representative to be sure you’re getting good information. Press them about it, ask about each detail. Tell them to clearly articulate what surcharges you could be hit with. Outside of that it’s about following industry leaders who post reputable information, who have a very strong understanding of the different carriers.”
Ultimately being proactive is the way to be prepared for holiday transportation fees. Optimize your shipping strategy in advance of peak season and you’ll have a much easier time forecasting. By choosing the right carrier for your brand, picking the right sized box for your product, and having a close relationship with your carrier or 3PL, you’ll be less likely to get any surprise fees.
If you are seeking shipping support for you ecommerce business, reach out to DCL Logistics for a quote. We have a very experienced transportation management team who can rate shop the lowest cost shipping service, and right freight carrier for your brand.