UPS Adds Holiday Delivery Surcharge

According to this NPR article, UPS is going to add a surcharge to packages delivered around Black Friday and Christmas.  UPS says they’re implementing the surcharge to offset their increased costs from hiring temporary personnel and adding delivery vehicles to cover demand which jumps by roughly 50% during this period.  The surcharge will run between Nov. 19 and Dec. 2 and then again from Dec. 17 to Dec. 23.

This change can spark a good discussion about how interconnected the links in the channel of distribution are.  What are some of the potential repercussions of this surcharge?  From a competitive standpoint, is it more likely for FedEx to copy this practice or will they hold price to gain a competitive advantage over UPS?  What’s the impact to retailers?  Will they pass these increases on to customers or absorb them?  If they pass them on, how will they do so?  It may not be as simple as increasing shipping costs as consumers are often turned off by high shipping fees and may decide to shop elsewhere if they feel shipping costs are unreasonable.  Push the students to think of creative options.  For instance, what if stores hold shipping prices constant but avoid the surcharge by delaying shipments until after the surcharge ends on Dec. 2?  If packages took longer to arrive than expected but still got to the customer well in advance of Christmas would that be acceptable?  Students may be surprised to realize how a change by one company can have a multitude of impacts on others.

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