United Parcel Service Inc said on Monday it will levy surcharges on U.S. residential packages during its crucial peak holiday season this year as it seeks to combat the spiraling costs of delivering e-commerce packages.
Like its main rival FedEx Corp, UPS has struggled with the expense of "the last mile" associated with delivering to residential addresses. The cost per package to businesses is typically lower because they receive more deliveries.
Atlanta-based UPS, the world's largest shipping company, said residential packages, large packages and those exceeding system weight limits would face surcharges of up to 97 cents for two-day air services to residential addresses from Dec. 17-23.
A 27 cent surcharge per package will apply to UPS' ground service from Nov. 19 to Dec. 2 and between Dec. 17 and Dec. 23.
"We're focused on helping our customers achieve success during some of their most important selling seasons," Alan Gershenhorn, UPS' chief commercial officer, said in a statement.
UPS's average daily volume exceeded 30 million packages on some days during its 2016 peak holiday season, far above its normal daily average of more than 19 million packages.
To meet that demand, UPS said it "acquires on a temporary basis and often at shorter-term premium rates, additional air and truck cargo capacity, temporary facilities, and additional sorting and delivery personnel."
UPS has worked closely with retailers to manage the peak season surge since struggling to do so in 2013 and 2014.
Both UPS and FedEx have spent billions of dollars in upgrading their networks to handle rapidly rising e-commerce package volumes, leaving investors chafing over the expense.
It is unclear whether Memphis-based FedEx, which is due to report quarterly results after the close of trading on Tuesday, plans to adopt a similar peak season surcharge policy.
Cutting delivery costs is a key priority in the e-commerce sector and was, according to industry experts, one of the reasons for Amazon Inc's announcement last week that it was buying Whole Foods Market Inc for $13.7 billion.
UPS shares were down 6 cents at $110.53 in late morning trading on Monday. FedEx was down 74 cents at $209.76 a share.