Retailers grapple with rising fuel surcharges to ship online orders

Canadian retailers are struggling with higher shipping costs as couriers add hefty fuel surcharges to shipping rates to bring back record gasoline prices.

The additional charge is driving up the cost of shipping goods within Canada, topping 40 percent for some carriers.

For stores with high online return rates, such as apparel and footwear companies, the increased cost of shipping can be especially challenging.

So far, most companies are trying to absorb the extra domestic shipping charges, said Michelle Wasylyshen, a spokeswoman for the Retail Council of Canada.

With inflation putting pressure on consumers and an ongoing battle for dollars online, he said retailers are reluctant to pass on costs.

“Retail is one of the most competitive industries in Canada, so raising minimum free shipping thresholds or adding surcharges directly to consumers is often done as a last resort,” he said.

“Retailers would rather find savings elsewhere.”

Higher domestic shipping costs come as international freight costs finally start to level off.

Retailers have basically traded more reasonable international container freight rates for higher shipments within Canada, experts say.

“The idea of ​​ever being balanced around fuel prices or containers or what’s happening with supply chains around the world is gone,” said Indigo Books & Music Inc. President Peter Ruis, in an interview.

Indigo, which has seen online sales soar during the pandemic, is also avoiding raising prices even as shipping rates soared.

“We are absolutely clear that especially at this time with inflation and how customers are feeling … we will not want to raise prices,” Ruis said.

Instead, the company is focused on developing the ability to ship from local stores, rather than a centralized warehouse, to reduce shipping costs.

“In October we launched our new website that will have a ship-from-store service, which means we can use all of our stores as a warehouse for the online consumer,” said Ruis. “If someone is in Halifax, we can choose to ship products from the Halifax store instead of the central (distribution center) in Toronto or Calgary.”

He added: “In a situation where fuel charges are really tough, we can mitigate that by shipping stock locally.”

Clothing retailers, who often see the highest return volumes among retailers, also appear determined to avoid passing on fuel surcharges.

Canadian underwear and apparel brand Knix Wear Inc., which does most of its sales online and offers free return shipping on most orders, said it doesn’t plan to change the qualifying threshold for free shipping.

“We know there are a number of external factors that affect shipping and costs, but we don’t want our customers to feel those impacts,” company spokeswoman Emily Scarlett said.

Shipping surcharges vary between different courier companies.

A FedEx spokesman said the carrier manages fluctuations in fuel prices through “dynamic fuel surcharges.”

Fuel surcharges on shipments within Canada are subject to weekly adjustments based on a rounded average Canadian retail price per litre, James Anderson said in an email.

For out-of-country packages, the company bases its fuel surcharge on a rounded average of the US Gulf Coast spot price for a gallon of kerosene-type jet fuel, it said.

The FedEx Express fuel surcharge is currently 41.50 percent within Canada and 26.50 percent on international shipments.

DHL Express said it applies the fuel surcharge to offset fluctuations in fuel prices, which can affect the cost of transportation services, particularly for the company’s aviation fleet.

The fuel surcharge for international shipments is set at 25 percent for July 2022, according to the company’s website.

Canada Post’s fuel surcharge on domestic services is currently 37 percent, while its international parcel service is 21.75 percent, according to its website.

This report from The Canadian Press was first published on July 3, 2022.

Leave a Comment