A Simple Economics Question

[tybfc]

I received an email from Hermes today which I have extracted the following from.

Bearing in mind the current low fuel costs and the logistical situation in the UK I was surprised at what I read.

I am no economist so can somebody explain why they would be increasing their costs now?

"As you may recall from our March email, our annual price increase was due to be implemented on Saturday 28th March. However, in support of our consumer senders, micro-businesses and market-place sellers during this uncertain period, we deferred the changes to Saturday 2nd May subject to review.

Since then, our costs have increased as we ensure the safe delivery of exceptionally high parcel volumes, which means that we are unable to delay the annual price increase any longer. The planned change, an average of 3% across our ParcelShop and Courier services, will come into effect from midnight on Saturday 2nd May and our new prices are detailed in the table below."

[UnderSeige]

When demand increases, prices rise. Demand for internet products and deliveries has increased since people cannot get out to the shops. Therefore demand for courier services increase.

Costs might also have increased due to more careful handling of products. E.G. social distancing in the warehouse and packing; paying staff overtime etc.

[dougcollins]

Or they may just be wanting to make more money.

[taio]

They seem to be alluding to an increase in their operating costs due to Covid, which could be higher levels of staff absence and other costs to support the workforce during the pandemic. A 3% annual increase doesn't seem unreasonable but any customer dissatisfied has the choice of using an alternative provider.

[IanMcL]

The minimum wage went up in April too.

[UnderSeige]

Dougcollins wrote: Or they may just be wanting to make more money.

Correct. All economic theory is based on the strong assumption that consumers and producers act in their own self interest. Consumers can act in their self interest by switching to a cheaper alternative.