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Pricing For Effort: What is Residential Delivery Surcharge?

Pricing For Effort: What is Residential Delivery Surcharge?

Freightways Group, parent company of NZ Couriers, Posthaste, Castle Parcels, Now Couriers, Pass The Parcel and Sub60 have announced earlier this month the new Pricing For Effort scheme, PFE for short, that from the 1st of July parcels being sent to residential addresses will incur an extra residential delivery surcharge of $0.95, many of our blog readers and shippers ask us to explain this surcharge and want to know what are their options going forward.

Let me explain the history of this surcharge, how it is implemented and what options are available to avoid being charged a residential delivery charge.

The history of residential delivery surcharge & why?

Let’s have a quick history lesson shall we? When courier services was first invented (yes these were the days before the internet), the courier services are mainly used by businesses to deliver packages to other businesses, in our industry we call this B2B (business to business deliveries), the advantages of B2B deliveries are that:

  1. The courier drivers operates in a relatively dense business area
  2. Businesses generally are open during business hours
  3. Businesses sends and receives multiple parcels regularly, so the drivers makes more money per trip, doing shorter distance and less trips. About 70% of today’s deliveries are B2B.

Then it comes the internet and ecommerce, most ecommerce deliveries are what we called B2C (business to consumer) because it’s mostly consumers buying online from businesses and the businesses shipping directly to the consumers. The courier companies faces a number of challenges with B2C deliveries:

  1. Residential area are more spread out than business area
  2. A lot of residential addresses are unattended during business hours when the drivers makes their deliveries. Over 50% of residential deliveries attempts fails the first time due to no one home to sign for the parcels, gated housing development or apartments, dogs on site etc
  3. Residential addresses receives less parcels, so the driver makes less money, doing longer distance and more trips including redeliveries, I think you get the picture …

So Freightways is introducing this new Pricing For Effort scheme to recognise the extra effort the drivers takes to deliver to residential addresses, much like the existing Rural Delivery Surcharge.

How is the residential delivery surcharge being implemented?

Freightways Group have spent the last year upgrading their IT system and ring fencing and distinguishing the business and residential area on the map, this is similar to how rural area is currently done, when an address is enter into the Parcelport system, the system can tell you if the address is business, residential or rural.

There is two types of Residential Delivery Surcharge, a charge for verified address ($0.95+GST) and a charge for unverified address ($1.15+GST), Parcelport system uses verified addresses using satelite coordinates, so all Freightways residential deliveries via Parcelport will be charge at the lower rate of $0.95 and not $1.15

What are the ways to avoid residential delivery charge?

There are a number of ways to avoid paying residential delivery charge:

  1. Have the parcel delivered to a work address
  2. Have the parcel delivered to a pickup location such as parcel locker
  3. Other options such as Courierpost do not have a specific residential delivery charge, however they do apply a blanket price increase on all the deliveries including B2B deliveries, they offer cheap courier option on residential deliveries but because of the blanket price increase their B2B deliveries would be more expensive.

Any questions on residential delivery charge please feel free to get in touch with us at Parcelport

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