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UPS Eliminates Discounts for Large Retailers

UPS is doing away with the big discounts large retailers receive on oversize packages this holiday season – and in some cases, year round – according to the Wall Street Journal.

The shipping carrier has been broadcasting its intention to implement new pricing strategies during peak season since January, after heavy investments last year to avoid the problems it saw during the 2013 holiday shopping season put a strain on its profitability.

“UPS invested heavily to ensure we would provide excellent service during peak when deliveries more than double,” its CEO saidin a statement in late January 2015. “Though customers enjoyed high quality service, it came at a cost to UPS. Going forward, we will reduce operating costs and implement new pricing strategies during peak season.”

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It gave more color around the problem when reporting first-quarter results in February. UPS CEO David Abney had said “we absolutely will charge our customers more for the extra costs that we have in peak and that we absolutely are pushing our foot down harder from a revenue management side.”

While UPS still has not provided much detail about the rate changes, the Wall Street Journal reported this week that UPS is telling dozens of retailers it intends to do away with big discounts on oversize packages this holiday season and, in the case of some retailers, year round, citing “people familiar with the matter.”

The newspaper said that as online offers of free shipping on bigger and heavier items like grills, mattresses and patio furniture have ballooned, it has caused a logjam for UPS’s network, especially during the holidays.

So what’s changing? “In one scenario,” the Journal wrote, “the cost of shipping a 50-pound oversize package such as a barbque grill could more than triple from the current price of $29, depending on a retailers’ discounts. The increase would have to be absorbed by the retailer, the consumer or both.”

It said UPS is approaching customers on a case-by-case basis; Walmart and Costco said its shipping agreements are confidential, and said Home Depot hadn’t heard of any changes to its shipping agreements. The Wall Street Journal didn’t mention Amazon in its report, but sellers have already expressed concern about the changes.

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Ina Steiner

Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. Send news tips to ina@ecommercebytes.com.


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