Courier Fuel Surcharges - The Hidden Cost of Selling Online

The world is currently awash with a glut of cheap oil. The price for a barrel of Brent Crude has dropped sharply in the last 18 months, it has even lost 20% of its value since Christmas. This has translated into much cheaper fuel prices at the pumps for us here in the UK, not cheap enough obviously, but most of the cost of a litre of fuel is now made up of fuel duty and VAT. On a 99p litre of fuel at the supermarket, the actual cost of the fuel is only about 25p.

We are constantly working hard to keep our costs as low as possible, so we can pass on savings to our customers. The one cost we cannot control effectively is the shipping costs to deliver orders. We do our best, we work with a broad range of the main players in the industry, all of whom impose a surcharge on every single parcel we ship. Currently, this is in the region of between 3% (Royal Mail) to 5% (UPS). Some couriers charge even more, but we don’t use them.

If costs increase for most companies you are faced with two choices. You can raise your prices, risking upsetting customers and losing business to cheaper competitors. Alternatively, you can sacrifice profits to keep prices stable and retain your market share. The courier companies have found a 3^rd option: fuel surcharges.

When oil prices started to rise so quickly in the early 2000’s, many courier companies implemented fuel surcharges into their pricing. If fuel prices are at a recent historic low, why do the parcel couriers, still impose a fuel surcharge on every single parcel they deliver? We believe originally, fuel surcharges were a clear, mathematically determined system for courier companies to claw back their expenses when there is an unexpectedly high fuel price. Now after a prolonged period of falling fuel prices to (recent) historic lows it is more a way of raising extra profit while duping customers into thinking they are not paying more than they were last year.

Courier companies do huge volumes of business. Their fleet of vehicles are moving 24 hours a day, 7 days a week, regardless of whether they are carrying 10, 20 or 1000 packages. Imagine sending 3 separate parcels to 3 different companies in an industrial park in the same town, the customer is stung with the fuel surcharge on each package. No extra fuel has been used by the courier.

Naturally, the couriers would claim that they buy their diesel many months in advance. This is why we don’t see the surcharges going up and down like the prices we see at the fuel pumps.

Essentially, these guys are imposing these surcharges instead of raising their prices. Are they hoping their customers are too thick to notice? How many other industries have a 40% reduction in their main cost and still impose a surcharge on their customers?

Who ultimately pays for this sneaky profiteering? You, me and the other 40 million people in the UK who shop online, that’s who.