Photo: Canadian Press
Canadian retailers are struggling with higher shipping costs because couriers use hefty fuel surcharges on shipping rates to recover record gas prices.
The extra charge is sending higher shipping costs across Canada, above 40 per cent for some carriers.
For stores with high online return rates, such as clothing and footwear companies, the increased cost of shipping can be particularly challenging.
So far, most companies are trying to absorb additional internal shipping charges, said Michelle Wasilishen, a spokeswoman for the Retail Council of Canada.
With inflation squeezing consumers and an ongoing battle for the online dollar, he said retailers are reluctant to spend.
“Retail is one of Canada’s most competitive industries, so raising the minimum free shipping threshold or adding surcharges directly to consumers is often done as a last resort,” he said.
“Retailers would love to find savings elsewhere.”
High domestic shipping costs come as international freight costs eventually begin to stabilize.
Retailers have basically traded at a more reasonable international container freight rate for higher shipping within Canada, experts say.
Peter Ruiz, president of Indigo Books & Music Inc., said in an interview that “the idea of balancing the price of fuel or what is happening in containers or with the global supply chain is long gone.”
Indigo, which saw online sales rise during the epidemic, is avoiding raising prices despite shipping rates skyrocketing.
“We’re very clear about how inflation and consumers are feeling, especially at the moment … We don’t want to raise prices,” Ruiz said.
Instead, the company is focusing on developing the ability to ship from local stores rather than from centralized warehouses to reduce shipping costs.
“In October we launched our new website to have a ship from the store facility, which means we can use all of our stores as warehouses for online consumers,” Ruis said. “If someone is in Halifax, we can send products from the Halifax store instead of their Toronto or Calgary central (distribution center).”
He added: “In situations where fuel charges are really difficult, we can alleviate it by sending stock locally.”
Clothing retailers, who often see the highest return volume among retailers, are also determined to avoid fuel surcharges.
Canadian underwear and apparel brand Knix Wear Inc., which sells most of it online and offers free return shipping on most orders, says it does not plan to change the eligibility 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 effects,” said company spokeswoman Emily Scarlett.
Shipping surcharges vary between different courier companies.
A FedEx spokesman said the shipping company manages fluctuations in fuel prices through “dynamic fuel surcharges”.
The fuel surcharge on shipments in Canada is subject to weekly adjustments based on a rounded average of the retail price of Canadian diesel per liter, James Anderson said in an email.
For out-of-country packages, the company bases its fuel surcharge on a rounded average of spot prices on the U.S. Gulf Coast for one gallon of kerosene-type jet fuel, he said.
The FedEx Express fuel surcharge is currently 41.50 percent in Canada, and 26.50 percent on international shipments.
DHL Express says it imposes fuel surcharges to offset fluctuations in fuel prices, which could affect the cost of transportation services – especially for the company’s aviation fleet.
According to the company’s website, the fuel surcharge for international shipments for July 2022 has been set at 25 percent.
The fuel surcharge on Canada Post’s domestic services is currently 37 percent, while its international parcel service is 21.75 percent, according to its website.