Photo: The Canadian Press
Canadian retailers are struggling with higher shipping costs as couriers impose significant fuel surcharges on shipping rates to recover record gas prices.
The additional charge makes the cost of shipping goods to Canada higher, exceeding 40% for some carriers.
For stores with high online return rates, such as clothing and footwear companies, increasing the shipping cost can be especially difficult.
So far, most companies are trying to absorb the additional domestic shipping costs, said Retail Council of Canada spokeswoman Michelle Wasylyshen.
With inflation squeezing consumers and a constant battle for dollars online, he said retailers are reluctant to pass on the costs.
“Retail is one of Canada’s most competitive industries, so raising the minimum free shipping thresholds or adding surcharges directly to consumers is often done as a last resort,” he said.
“Retailers would rather find savings elsewhere.”
Higher domestic shipping costs occur when international transportation costs finally begin to stabilize.
According to experts, retailers have basically negotiated more reasonable international container shipping rates for higher shipment to Canada.
“The idea of never being in balance around fuel or container prices or what’s happening with global supply chains is gone,” Indigo Books & Music Inc. President Peter Ruis said in an interview.
Indigo, which saw online sales rise during the pandemic, also avoids raising prices despite skyrocketing shipping rates.
“We’re absolutely clear that especially right now with inflation and how customers are feeling … we don’t want to raise prices,” Ruis said.
Instead, the company is focusing on developing shipping capacity from local stores, rather than a centralized warehouse, to reduce shipping costs.
“In October we will be launching our new website which will have a ship from the store, which means we can use all of our stores as a store for the online consumer,” Ruis said. “If someone is in Halifax, we could choose to ship the product to them from the Halifax store instead of from downtown Toronto or Calgary.”
He added: “In a situation where fuel charges are really difficult, we can mitigate it by sending stock locally.”
Clothing retailers, who often see the highest return volumes among retailers, also seem determined to avoid passing on fuel surcharges.
Canadian lingerie and clothing brand Knix Wear Inc., which makes most of its online sales and offers free return shipping on most orders, said it has no plans to change the rating threshold 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 impacts,” 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.”
Fuel surcharges on shipments within Canada are 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 the U.S. Gulf Coast’s cash price per gallon of kerosene-type aircraft fuel, he said.
FedEx Express fuel surcharge is currently 41.50% in Canada and 26.50% in international shipments.
DHL Express said it applies the fuel surcharge to offset fluctuations in fuel prices, which could affect the cost of transportation services, especially for the company’s aviation fleet.
The fuel surcharge for international shipments is set at 25% by July 2022, according to the company’s website.
Canada Post’s fuel surcharge on domestic services is currently 37%, while its international package service is 21.75%, according to its website.