This week, we’re going to take a look at the fuel surcharges that are added on to your shipping costs by the package carriers. The carriers changed how they structure the surcharge for ground service in 2011. It is now based on $0.12 increments of the average on-highway diesel fuel prices, with each change of $0.12 corresponding to a 0.5% change in the fuel surcharge. The chart begins at $1.99 (wouldn’t that be nice to see again!) with a 1% surcharge and currently goes up to $4.15 with a 10% surcharge (unfortunately too close for comfort). The fuel surcharge is updated monthly, allowing the carriers to deal with their fluctuating fuel costs by passing them along to you, their customers.
Over the five years since 2006, the shipping fuel surcharge has fluctuated from a low of 2.25% to a high of 10.25%. Many of you will recall in 2008 when the surcharge began at 6.25%, skyrocketed to 10.25% in the summer, and then fell back to 6.75% after oil prices went down with the stock market. In 2009 we saw the lowest prices in this time period—the 12 month period from July 2008 to July 2009 saw eight percentage points shaved off the surcharge to a low of 2.25%. 2010 had a pretty stable fuel market, with the surcharge staying between 5 and 6%. This year, we have seen the price climb again from 5.5% in January up to 9% currently. For September, it drops to 8.5%.
These costs are the great unknown of shipping charges for online retailers. We don’t know what fuel will cost in three months, but that cost definitely impacts how you plan for the busy season. To gauge the impact, you can make sure that your shipping system accurately reports these costs to you. Multi-carrier shipping systems, such as Harvey Software’s CPS shipping software, are updated monthly to reflect the national carriers’ surcharge changes, and CPS users can rest assured knowing they are not surprised by the carriers’ surcharges.
In some ways, this fuel surcharge is similar to an Internet retailer charging for shipping. The cost of getting the product from warehouse to customer is passed along to the customer. This can put the retailer in an awkward place—the carriers are passing their costs along to you, but with new pressure from competitors to provide flat rate and free shipping, the retailer is hard pressed to pass the same costs along to its customers. This is why Harvey Software’s CPS multi-carrier shipping system is so important.
The fact is, not all multi-carrier shipping systems are created equal. Not all are certified and able to provide the rate optimization features found in CPS. Not only does CPS allow you to take advantage of the best rating available for each shipment, you are also able to track your shipping costs over extended periods of time or through fluctuating shipping cycles. Another CPS exclusive is easily accessible reporting, which shows the optimal prices to charge when evaluating flat rate or free shipping promotions. This allows online merchants to flatten out their shipping expenses and offer attractive shipping prices to their customers. In today’s competitive online market, the right flat rate shipping charge strategy can open up new customers and their business to your company.
As you continue to prepare sales and promotions, consider using the CPS shipping system to help you accurately track your shipping costs, including the fuel surcharges. For more information, visit www.HarveySoft.com.
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