Rick Thomas, senior vice president of business development with GEODIS, offers an overview of current parcel carrier rates and surcharges, and what the coming peak season might look like.
Parcel carrier rates continued to rise in 2022, Thomas notes, further elevated by a series of surcharges for oversized items, fuel expense, remote deliveries and other factors. Overall, he says, shippers today are seeing about a 9% increase in their parcel rates.
Surcharges have long been a cause for complaint by shippers, historically hovering in the 10% to 15% range. Since the COVID-19 pandemic, however, they have been closer to 40% of the base rate.
Higher fuel costs are another major reason, as are inflation and a need by carriers to expand their networks in line with the surge in online shopping. A recent study by ShipWare concluded that some 4.7 million addresses in the U.S. will experience increased rates based on surcharges for remote deliveries.
The year-end peak season provides further justification by carriers to raise parcel rates, and in some cases place caps on the amount of business they’ll accept from major customers during the busiest weeks. Thomas says carriers will be focusing more on small to mid-sized accounts, which generally yield higher profits because they can’t negotiate volume discounts like their larger counterparts.
That said, smaller shippers have more leverage with carriers than in the past, and should be in a position to renegotiate rates to some extent.
Across the board, however, Thomas expects a softening of demand for parcel services this year over the extreme peaks of 2020 and 2021, in support of online purchasing. As the pandemic abates, consumers are growing more comfortable about returning to physical stores. And their overall level of spending is likely to dip someone, a reflection of concerns over a possible recession just over the horizon.
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