Wineries shipping direct-to-consumer via UPS may be affected by a new holiday shipping surcharge.
For Direct to Consumer (DtC) wineries, the hot summer months trend to slower sales. Instead, it is the cooler and more festive winter months when DtC sales really peak. However, a recent announcement by UPS regarding a plan to add delivery surcharges this November and December may affect how wineries should plan for the holiday season.
What Did UPS Announce?
According to the June announcement, these shipping surcharges will apply:
- November 19 — December 2: an additional $0.27 will be applied to packages shipped through UPS Ground Residential.
- December 17 — 23: a $0.27 surcharge will again be applied on UPS Ground shipments; an additional $0.97 on both UPS 2nd Day and 3rd Day Air shipments; and an additional $0.81 charge on UPS Next Day Air.
The additional charges will also apply on all Large Packages and packages that exceed maximum size limits from November 19 through December 23.
According to the announcement, these additional rates are designed to mitigate the extra costs that the shipping company assumes during the holiday season. In 2016, UPS had an average daily volume of over 30 million packages during the holiday season. This is compared with an average daily volume of around 19 million packages the rest of the year.
To accommodate this significant increase in daily shipping, UPS hires about 95,000 seasonal employees. The surcharges, therefore, more reflect the great success of the online retail industry as much as the very real costs of home deliveries.
Towards the end of June FedEx announced that it does not have any current plans to institute a similar holiday surcharge. However, FedEx faces the same pressure as UPS to meet the holiday surge in shipping, resulting in much greater operational costs. So it is possible that FedEx may change its mind between now and the holidays and establish surcharges.
What Does This Mean For DtC Wineries?
Since these surcharges won’t apply until much later this year, there is plenty of time to anticipate and plan for their effects. The biggest consideration, really, is how much these surcharges may affect your bottom line. The answer depends on how you charge for shipping costs.
If you charge customers with the actual cost of shipping, then they’ll see a slight bump for shipments in November and December. Shipping costs for DtC wine are generally on the more expensive side (because of the weight of wine), so a 27 or 97 cent bump may not be too noticeable.
If you provide a flat fee for shipping, you may choose to absorb the extra costs. Or, you may decide to raise that fee for certain weeks later this year.
Direct-to-consumer wineries are largely prohibited from offering any free incentives to customers, which includes free shipping. But many wineries still do offer vastly reduced or merely nominal shipping charges. In which case the concern of whether the winery will take on the cost of the surcharge itself would apply.
Alternatively, encouraging customers to make their holiday purchases earlier in the year — say in October — could be the best way to go all around. Everyone would avoid the surcharge fee, consumers could assure that they’ll get their holiday wine in time, and UPS would benefit by having a reduced package load at what is otherwise a very busy time of year.