Transportation and logistics bellwether FedEx yesterday announced rate increases for various business lines, including FedEx Express, FedEx Ground, and FedEx Freight, which will take effect on January 1, 2018.
The announced 2018 rate changes by the Memphis, Tenn.-based company include:
FedEx officials did not provide any additional comments about the scheduled rate increases.
And the company’s primary competitor, UPS, has not announced 2017 rate increases at this point.
“Of note in this years FedEx annual General Rate Increase is the new fee of 2.5% on invoices that are third-party billed,” said Jerry Hempstead, president of Hempstead Consulting, in an interview.
“Nobody can fault FedEx for doing so because UPS has had this fee for this since January 2016. It was just money left on the table for FedEx this past year. The reality of this is that because so many now drop ship in this e-commerce world, there is an ever-increasing number of third party-billed transactions. But as has happened in the past this fee is negotiable if the carrier rep fights for your account.”
What’s more, he added that FedEx’s dimensional pricing rules, which include the FedEx Express and FedEx Ground U.S. domestic dimensional weight advisor change from 166 to 139 that took effect in January, will now be inflicted on transactions for SmartPost, the company’s last mile” delivery service partnership with the USPS, and is expected to be a net negative for customers.
“Because this hybrid postal product [SmartPost] is designed to be a B2C (business-to-consumer) solution it's going to hurt the e-commerce world tremendously,” said Hempstead.
Other announced changes by FedEx that shippers need to focus on, according to Hempstead, are the announced changes to the Additional Handling/ Oversized transactions, including:
These changes were somewhat telegraphed in comments made by Rajesh Subramaniam, FedEx EVP, Chief Marketing & Communications Officer, on the company’s fiscal fourth quarter 2017 earnings call in June.
“We also continue to experience growth in demand for large, heavy package delivery as a growing array of items are now being sold online,” he explained.
“Furniture, mattresses, sports and exercise equipment are increasingly moving to the FedEx Ground network for residential delivery. This trend has accelerated over the past 12 months, and we have made adjustments to facilities and investments in sortation technology that enable outstanding service for these larger packages. We're continuing to analyze pricing and surcharges for oversized packages to ensure that we have appropriate pricing for the service provided.”
The company's stock has climbed 14.2% this year, with the S&P 500 index SPX, +0.10% gaining 10.4%. FedEx announces earnings after Tuesday's market close.
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