Thought Leadership

The Customer Relations Perspective on an "Industry Surcharge"

Now that the Christmas season has come and gone, shippers and logistics professionals are nursing the holiday hangover that comes after weeks of long days and nights trying to get everything delivered on time.

With online shopping – and typically shipping direct to individual homes – continuing to rise, the logistics industry is once again thinking about a holiday surcharge that could help prevent the shipping mishaps experienced by UPS and FedEx at the end of 2013. The most vocal proponent this season is Satish Jindel of SJ Consulting, who has called for a price increase when a customer order expands beyond an average daily volume set during the rest of the year.

Jindel also says that retailers could blackout free shipping guarantees on peak holiday season days – a move few retailers would consider on Black Friday or Cyber Monday, but may consider closer to December 24.

A push like this would have the benefit of ensuring the end-consumer that the goods they buy arrive and the shipping date they pay for is honored because it makes retailer promises more realistic.

The Upshot

The largest upside in such a move is managing customer expectations. Retailers would have to think very carefully about promises that goods ordered just days before Christmas would arrive on time.

The surcharge would also provide retailers with a clear volume map from their carriers, showing how far out they expect to be overburdened. This could easily translate to savings for consumers who shop early, even if that is just a clearly defined window of free shipping or a way to avoid shipping increases.

Increased costs help manage demand and ensure a positive experience for the community at large. In theory, it would manage expectations for every person involved in merchandise, from production through final delivery. It also breeds higher expectations of content and quality by customers who are willing to pay the higher price for special-cost delivery.

If instituted at the shipping level, then the carrier would bear all of the blame for late delivery – exactly where fault was placed during the 2013 mess. Holiday pricing could lead to higher profits and expectations, but it may leave a bad taste in the customer’s mouth if such an increase comes after a year where promises and contracts weren’t met.

The Major Downside

There are a few different downsides that could come of a holiday surcharge becoming part of any process, from increased costs through shipments being pre-staged to increase demand outside of the surcharge window. However, there is one problem that dwarfs all others and is the only issue that any industry should concern itself with: strained relationships with customers.

Whether the customer is a vendor, retail partner, or the end-consumer, a surcharge around holidays and other events has the potential to damage a relationship that must flourish all year long. Introducing additional costs to times where staff is often overworked to meet increased demand makes you a convenient place to target all of that frustration.

Customer service is part of every relationship and raising rates – in some cases without raising delivery quality or capabilities – can easily be seen as a punishment instead of the cost of doing business. Clear communication between partners and the consumer at large is the best way to keep expectations realistic and not shift the blame to the wrong party for improper promises.

Every industry needs to be careful when raising any price in order to meet demand. We must ask ourselves: should customers really be penalized when providing us with extra business?