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Scottish Affairs Committee examines excessive courier surcharges

By Chris Dawson March 2, 2018 - 10:21 am

Earlier this week, the Scottish Affairs Committee held a session discussing Delivery charges in Scotland where Amazon, Argos and eBay were called in to discuss courier surcharges, followed by DPD, JBT and Menzies couriers.

It’s worth pointing out that the committee almost immediately dismissed large bulky items which require special handling or a two man delivery – a sofa for example, they’re happy to accept will cost more to delivery to a remote Scottish hamlet than to an address in a large city. What they take issue with is excessive surcharges for general merchandise. This does beg the question as to what ‘excessive’ means which we’ll examine below.

We have every sympathy for those who live in outlying areas (I should know, my mother lives on the Isle of Wight so I regularly get stung with surcharges). It’s equally a challenge for retailers operating from the outskirts of the UK as they are also hit with higher costs to get parcels delivered.

One touchy question that has to be asked is should people pay more based on where they live? If you reside in a remote location, is it fair that you incur significantly higher (perhaps excessive) delivery expenses or should the rest of the UK be expected to subsidise the cost?

Marketplace and Retailer surcharges

Amazon were very clear that they do not allow third party sellers to apply surcharges to different parts of the UK. Amazon themselves offer a flat rate delivery across the UK and added that they can share their scale through FBA to enable retailers who can’t absorb prices to do the same.

Argos quite simply stated that they have recently negotiated a contract with Yodel and no longer surcharge and also now have a flat rate across the UK.

eBay explained that they do allow sellers to surcharge for different areas of the UK, but strongly encourage sellers to offer free shipping, use eBay postage labels and monitor accounts through feedback.

Both eBay and Amazon explained that they will try to surface the best overall deal for the customer bearing in mind the item price and the delivery charge and so differentiate themselves to a retailer who sets a single price for a product on their website.

Courier surcharges

The choice of couriers by the Scottish Affairs Committee were a strange selection. DPD is a national carrier but JBT is a Scottish courier and Menzies handle DPDs Scottish deliveries so could almost under those circumstances be superfluous to the conversation, although they do contract with other customers as well. It may have been more revealing to invite at least one more national carrier as DPD were at a disadvantage.

DPD explained that they set three rates – the UK, The Highlands and The Islands and agree these rates with retailers in advance.

The couriers also pointed out that whilst they set what they consider to be reasonable surcharges, they themselves had personally seen excessive charges from retailers.

DPD Surcharges

It’s not possible to know what rates retailers negotiate with couriers as it will be on a contract by contract basis. What we do know however is that many online sellers won’t have a courier account and will book parcels on a case by case basis and everyone does have access to DPD Local so these rates we do know. We selected the lowest cost rate to each destination titled “Next Day Services”, but for most remote destinations the best on offer was a two day service:

DLD local current rates for a Parcel weighing 2kg and sized at 35cm x 20cm x 15cm
Destination Service DPD Local Price
United Kingdom Door 2 Door – Next Day £7.49 exc VAT – £8.99 inc VAT
Scottish Highland Door 2 Door – Two Day £15.99 exc VAT – £19.19 inc VAT
Scottish Islands Door 2 Door – Two Day £15.99 exc VAT – £19.19 inc VAT
Northern Ireland Door 2 Door – Two Day £16.99 exc VAT – £20.39 inc VAT
Isle of Wight Door 2 Door – Two Day £16.99 exc VAT – £20.39 inc VAT
Isle of Man Door 2 Door – Two Day £16.99 exc VAT – £20.39 inc VAT

 
Seeing these prices was a bit of a shock. For a small retailer booking through DPD Local, the cost will be more than double to deliver to the outlying areas of the UK combined with a slower services. DPD charge more to deliver from Berkshire to the Isle of Wight, about 70 miles, than to carry out a delivery 570 miles away in the Hebrides.

It’s little wonder that when consumers enter their address and immediately see an £8.99 delivery charge jump to £19.99 or higher that they feel a bit ripped off.

It’s worth noting that we’re not aiming to complain about DPD here, just as other couriers do, they operate in a competitive environment and if they averaged their prices across the UK then they’d be uncompetitive across most of the country and lose business. Only the Royal Mail operate under a Universal Service Obligation meaning one price to every house in the UK.

Where online sellers accidentally gouge on prices

What we do often see is online sellers setting a free postage option for most of the UK and then surcharging for the outlying areas. Unfortunately, often when setting their postage tables they’ll enter the full rate for delivery to the Highlands and Islands. For instance – UK Delivery: Free; Highlands and Islands: £19.99

The error is that they’ve already built the £8.99 delivery cost into the item price so the surcharge for Highlands and Islands should more correctly be £19.99 – £8.99 = £11.00. That’s still a pretty steep surcharge, but by discounting the base price already included as ‘Free’, it’s slightly less excessive.

Do you have access to flat courier charges?

We suspect that many small businesses simply don’t have access to reasonable courier rates for outlying areas of the UK. It’s most certainly not just DPD that add significant costs as soon as a parcel has to travel a bit further, most other couriers apply similarly high uplifts in their prices.

How do you handle deliveries for Amazon customers when you are banned from surcharging and do you surcharge on eBay, your website or other marketplaces? Where are the best deals to be had?

  • Rob
    2 years ago

    I find the shuttle service on ebay using UPS and MyHermes pretty good for most of the remote areas that some carriers and parcel booking companies charge a fortune for.
    I have been stood in the post office que a few times and seen people sending a small or medium parcel in the UK and see that it cost more to send that I have sent things across Europe with ebays global shipping.

    Some times just have to shop around the parcel booking companies depending on the size and weight of the item.

  • Max
    2 years ago

    I have always wondered how surcharge costs are calculated.

    How many parcels can you fit in a van to cross the Solent to the Isle of Wight?

    Our local courier men usually have between 60 and 80 parcels to deliver for only part of the Isle of Wight. It means the surcharges charged to senders totaled £600 to £900. Assuming this van came from the mainland (which is obviously not true as all parcels came at the same time on a big lorry), the crossing cost for a van is £210 before any discount.

    It seems to me it is more a nice money making exercise than the real cost incurred.

    On the matter of knowing the rates negotiated by retailers for “remote” de liveries, the answer is most retailers do not negotiate them as they simply agree the places are “remote” and do not represent the majority of customers.

  • Toby
    2 years ago

    If it weren’t for royal mails universal price then this would be a non starting convo.
    Imagaine if I were a taxi driver and was being told to charge the same to do a trip to a place 50 miles up the road as one 400 miles up the road? It’s a similar point.
    Now my courier doesnt charge extra for some parts fo scotland – the most populated ones, and i guess that is because they get a good deal of delivers there…. but move to the highlands and it jumps alot. The reaosn is proberly that the driver has to go a great distance to get to one house….. and then another long distance to the other one. It really isn’t rocket science that the more deliveries you can make ina smaller area ina smaller amount of tiem the more money you make and the lower you can set your prices. So i don’t disagree with the extra…..
    However in some cases the extra is OTT…. like has been said, the IOW, maybe even N.I but im not so sure on costs incurred by the couriers on that.
    If we move to a universal couirer charge rate then what will happen is the base price will jump, so we will all be paying more for the majority of our parcels and a bit less for the odd one that used to incurr a surcharge.

    • james
      2 years ago

      it’s a similar conversation, yes….
      We’re in Glasgow, and have to charge twice as much to send a parcel 40 miles north, as we do to send a parcel 400 miles south.
      would that make sense to a taxi driver?

      really grates me having to charge extra to Scottish people, who have ordered from a Scottish store “just down the road” in relative terms, when i can ship to a different country ten times further away, for half as much.
      (actually i can ship to half of europe cheaper than i can ship to half of my own country)
      – not only do we charge twice as much, but provide an inferior service, with it being a 2-day instead of next-day, for double the cost.

      population density is a factor, but so is distance. but when it comes to pricing our relatively close location is no factor at all. London is cheaper than Fort William.
      – and don’t tell me rural England has the population density to support this one-sided argument. I’ve yet to see a farmyard with more people in it than Aberdeen.

      we used to use ebay’s postage calculator for such things, but ebay wanted to charge me “Highland” postage from my work address to my house address, when i literally walked home for lunch and back every day, in the middle of a major city. obviously that had to be turned off as unfit for purpose.

      as usual, Scotland is an afterthought, as long as they bloody scots don’t whinge too loud, what do the rest of you care? and when we do whinge too loud, well its just they bloody scots whinging again, isn’t it?

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Royal Mail Ltd

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