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An annual rite of passage is upon us: peak season surcharges. UPS (NYSE: UPS), FedEx (NYSE: FDX), and the U.S. Postal Service have all announced their peak season surcharges in the past month.
The surcharges are designed to provide additional revenue during peak shipping times, such as the holiday season, when carriers often look to hire more delivery help and place additional vehicles on the roads to meet delivery demand.
Sendle, though, is forgoing any surcharges and promising customers they will continue to see transparent and flat-rate shipping. The firm has been growing quickly in the U.S. since its 2019 launch, and CEO and co-founder James Chin Moody told Modern Shipper its value proposition is based on making it as easy as possible for small and midsize businesses to conduct e-commerce.
"It's really about our commitment to the customer, and frankly, we don't look at things like margin for a couple of months — it's about loyalty, and loyalty to our customers. And it's about helping them compete," he said.
Sendle has seen tremendous growth in the past two years, and Moody said 50% of the e-commerce brands joining its platform in the past year have been new entrants to e-commerce.
"It's actually quite exciting that there will be new options [beyond FedEx and UPS]," he said. "We're about leveling the field for the small shipper and allowing them to compete as best as they can."
Unlike the big carriers, Sendle offers a single flat-rate shipping charge and importantly, is planning no surcharges this holiday season, regardless of the volumes shippers send through the Sendle network.
Sendle has designed its networks specifically for e-commerce businesses, offering local (less than 150 miles) and national rates, but unlike other providers, shippers pay flat rates based on weight. For instance, a small package weighing less than 5 pounds costs $7.30 to send locally and $8.11 to ship nationally under the Sendle Premium plan, which is designed for businesses shipping a minimum of 20 packages a month. There are also Standard (no minimum shipping quantities but slightly higher rates) and Pro plans (minimum 200 packages a month but the lowest possible rates). The fast-growing shipping provider saw record growth in 2020 and now has more than 800,000 global users, it said.
Sendle said its rates can be as much as 88% less than using traditional carriers. It has integrations with Shopify (NYSE: SHOP), eBay (NASDAQ: EBAY), Etsy (NASDAQ: ETSY), Squarespace, and WooCommerce.
The company recently inked an agreement with GLS Group to handle last-mile parcel deliveries in eight Western states. GLS offers parcel, less-than-truckload, and truckload transportation solutions in Europe and the western U.S. The agreement will enable e-commerce sellers to send goods through the Sendle shipping network for one-day and two-day delivery in Arizona, California, Idaho, Nevada, New Mexico, Oregon, Utah, and Washington. In addition, regional shippers will receive free pickups and shipment tracking.
Conversely, the larger, more traditional carriers are implementing surcharges. The Postal Service announced surcharges will begin on Oct. 3 and run through Dec. 26. The surcharges will apply to both retail and commercial customers. Surcharges on Priority Mail Express shipments delivered the next day, Priority Mail shipments delivered in two to three days, and Parcel Select bulk ground deliveries will range from $1 to $5 per piece depending on the weight and the distance traveled. For example, a Priority Mail shipment weighing 21 to 70 pounds — the Postal Service's parcel weight maximum — and traveling from 600 to more than 1,800 miles would be hit with a $5-per-piece surcharge.
UPS (NYSE: UPS) and FedEx (NYSE: FDX) are both applying surcharges on large shippers. UPS will impose the charges on any shipper that shipped more than 25,000 packages during any week following February 2020. The charges go into effect on Oct. 31 and continue through Jan. 15, and range from a low of $6.15 up to $11.50 per package for shippers with peak volumes exceeding 500% of their February 2020 volumes.
FedEx's surcharge kicks in for real on Nov. 1 when a $1.50-per-piece levy will be imposed on all deliveries moving under FedEx's Ground Economy program. That will be replaced by a new surcharge on Nov. 28 that ups the fee to $3 per package until Dec. 12. A third surcharge, from Dec. 13 to Jan. 16, reduces the surcharge to the original $1.50.
Moody said Sendle's approach is to tap the unseen capacity on the nation's highways to improve the shipping experience.
"There's a lot of trucks on the roads and they are not all UPS and FedEx. We're untapping that capacity in those networks and making them available for the small shippers," he said.
Concerns about capacity constraints this holiday season are real, but Moody is confident Sendle's network will be able to meet the demand, and if that means Sendle's margins are a little lower due to higher shipping rates, that's the path it will take to keep offering flat rates.
"It's about building for the long term," he noted. "We have long-term relationships with partners. We try to be a really good partner, and we do a lot of work around customer support, and we do a lot of work on customer care. I'm very confident around our ability to service capacity. What we're trying to do is build a very strong alternative to FedEx and UPS in the market."
Sendle closed a $35 million Series C investment round led by Afterpay-backed AP Ventures in June. Returning investors Federation, Full Circle Venture Capital, and NRMA Insurance also participated in the round. Sendle has now raised $73 million to date. Other investors include King River Capital, Rampersand, Giant Leap Fund, Black Sheep Capital, and Alberts Impact Capital.
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