Canadian retailers struggled with higher fuel surcharges to ship orders

Canadian retailers are struggling with rising freight costs as carriers impose exorbitant fuel surcharges on freight rates to recoup standard gas prices.

The additional fees drive up the cost of shipping goods within Canada, exceeding 40 percent for some carriers.

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

So far, most companies are trying to absorb the additional domestic shipping charges, said Michelle Waseline, a spokeswoman for the Canadian Retail Council.

With inflation pressing consumers and the ongoing battle for dollars online, she 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 additional fees to consumers directly is often done as a last resort,” she said.

“Retailers prefer to find savings elsewhere.”

The higher domestic shipping costs come as international shipping costs are finally starting to level off.

Experts say retailers have essentially bartered more reasonable international shipping rates for containers for higher freight within Canada.

Peter Ross, President of Indigo Books & Music Inc.

Indigo, which has seen online sales soar during the pandemic, is avoiding price hikes despite higher freight rates.

“We are very clear that at the moment especially with inflation and how customers are feeling … we will not want to raise prices,” Royce said.

Instead, the company is focusing on developing the ability to ship from local stores, rather than from a central warehouse, to lower shipping costs.

“In October, we launched our new website which will feature ship from warehouse, which means we can use all of our stores as an online consumer warehouse,” Royce said. “If someone is in Halifax, we can choose to have the product sent to them from a Halifax store rather than from a central (distribution center) in Toronto or Calgary.”

“In a situation where the fuel surcharge is really tough, we can mitigate that by sending stock locally,” he added.

Apparel retailers, which often see the highest volume returns among retailers, also seem determined to avoid passing the fuel surcharge.

Canadian clothing and lingerie brand Knix Wear Inc. , which does most of its sales online and offers free return shipping on most orders, it does not plan to change the minimum qualification for free shipping.

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

Additional shipping fees vary between different courier companies.

A FedEx spokesperson said the shipping company manages fluctuations in fuel prices through “dynamic fuel surcharges.”

James Anderson said in an email that the fuel surcharge on shipments within Canada is subject to weekly adjustments based on a rounded average retail price of Canadian diesel per liter.

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

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

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

The fuel surcharge for international shipments has been 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 the international parcel service is 21.75 percent, according to its website.

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