FedEx 5.9% rate rise masks steeper hikes for ecommerce shippers

Smaller, simpler FedEx closes UPS gap – it gets harder now Strategic and structural change to drive value DHL: IT LOOKS GOODDSV: DOWN TO A NEW LOW DSV: REALITY CHECKODFL: PRICING POWER XOM: GREEN PUSHEXPD: MOMENTUMKNIN: RALLYING DHL: POST-EXPRESS EVENT REACTIONMAERSK: UPGRADEDAMZN: NEW PARTNERSHIP DSV: BULLISH STANCE REMAINS UNCHANGEDWMT: FTC INVESTIGATION DHL: IT LOOKS GOODDSV: DOWN TO A NEW LOW DSV: REALITY CHECKODFL: PRICING POWER XOM: GREEN PUSHEXPD: MOMENTUMKNIN: RALLYING DHL: POST-EXPRESS EVENT REACTIONMAERSK: UPGRADEDAMZN: NEW PARTNERSHIP DSV: BULLISH STANCE REMAINS UNCHANGEDWMT: FTC INVESTIGATION Once again FedEx was the first out of the starting blocks to unveil rate hikes for the coming year, and once again the integrator’s increases average 5.9%, as they did in the past three years. And once again, the rates that FedEx will implement starting on 4 January, 2027 will be higher than the rate of inflation, which currently stands at 3.4%, according to the US Bureau of Labor Statistics. Further in the time-honoured tradition, the general rate increase (GRI) number veils an array of hikes well above those at 5.9%. Paul Yaussy, head of parcel contract intelligence at logistics data platform Loop, pointed out that five of the seven major services in FedEx’s portfolio, are set for increases higher than 5.9%, ranging from 6.01% to 6.65%. The exceptions are the Standard Overnight offering, which goes up 5.16%, and the Express Saver product, which rises by a moderate 3.09%. First and foremost, it is the latter which brings down the average rate of increase, while most shippers stand to face rate hikes north of 5.9%. Mr Yaussy called the low increase in Express Saver rates a defensive move, likely to prevent a shift from deferred air volume to ground service, or in response to competing deferred offerings in the market like UPS’s 3 Day Select service. Unlike last year, when rate increases on FedEx Ground for parcels between 11 and 20 lbs were steeper, this time lightweight parcels of 1-5 lbs are seeing the higher increases (6.49%), followed by parcels in the 5-10 lbs and 11-20 lbs brackets, a move that targets the bulk of ecommerce traffic, Mr Yaussy observed. As always, the prices customers end up paying are higher yet thanks to the range of surcharges that the integrators routinely employ. Many of them get an additional boost from fuel surcharges, Mr Yaussy pointed out. Surcharges for additional handling will rise 7-7.6%. Residents of rural areas will be hardest hit, facing a 9.09% increase in the extended delivery area surcharge, another indication that FedEx management is steering the business away from low-margin residential deliveries. The minimum charge for FedEx Ground shipments will go up 5.88-6.9%. Mr Yaussy warned that minimum charges apply regardless of negotiated discounts, adding that this affects a lot of lightweight shipments moving relatively short distances. “The minimum charge is the lowest amount a shipper can pay regardless of any negotiated discount. For lightweight, short-zone shipments it is not a floor you occasionally touch, it is the rate you actually pay on a meaningful share of your volume. Every point of minimum increase erases a point of discount on those packages, and no amount of base rate concession fixes it,” he stated. He called the new GRI “another exercise in strategic pricing, where a familiar headline masks a far less familiar structure underneath”, and where the real costs sit in the details. For shippers, this means that going by averages is not enough. They have to know their own shipping data in detail to establish how the various elements packed into the 5.9% GRI puzzle work out for them, he warned. For now, FedEx customers have other surcharges to contend with. As of Monday, 21 September, the integrator is levying demand surcharges on shipments to the US from Canada, Europe, Latin America and the Caribbean, and increasing demand surcharges from various origins in Asia. At the same time, charges on US exports to Canada, Europe, Australia and New Zealand, Latin and America have also gone up. On its website the carrier cited stronger traffic volumes, high demand for capacity and increased operating costs as causes for demand surcharges, which are levied on a per-pound basis. According to ShipScience, US imports from China, Hong Kong and Macau as well as from Japan and South Korea are facing the largest increases. For uninterrupted access, sign in or sign up to The Daily News, Premium or The Loadstar Enterprise Plan. Comment on this article