FedEx Adds Peak Fees on Shipments During Holiday Season

Date: Wednesday, August 19, 2020
Source: The Wall Street Journal

Delivery giant joins UPS and USPS in raising prices amid coronavirus pandemic and expected e-commerce surge

FedEx Corp. FDX +1.03% is adding extra fees on shipments during the holidays, joining United Parcel Service Inc. UPS +0.71% and the U.S. Postal Service in implementing surcharges to offset costs and control shipping volumes during what is expected to be a busy online shopping season.

FedEx says the surcharges are designed to primarily hit larger customers. They include fees as much as $2 on all packages shipped in the week after Thanksgiving for FedEx’s lower-priced SmartPost service, which is overwhelmingly used by large retailers. FedEx will also charge as much as $5 a package on its premium Express service for large shippers whose volume far exceeds normal levels.

The company says the fees, which are both higher and broader than previous years, are needed to help maintain service during its busiest time of the year. The changes were noted on FedEx’s website.

“We are entering this holiday peak season with extremely high demand for capacity while also experiencing increased operating costs across our network,” the company said. “We anticipate residential volume to continue to surge into the new year.”

Both UPS and the Postal Service have disclosed their own price increases for the peak shipping season, which is forecast to be challenging, with shoppers expected to avoid crowded stores over fears of the coronavirus. That will push more of the holiday shopping online. The carriers are aiming to prevent their networks from being overwhelmed, while also capitalizing on newfound pricing power in the market.

Higher prices from all three companies will challenge retailers who have relied on e-commerce to sustain sales this year. They can either charge consumers higher fees for shipping, raise prices or eat the costs. Retailers may also rely more on their stores to get online orders to shoppers, by encouraging pickup of orders or having them shipped to the stores, since the surcharges primarily apply to residential shipments.

FedEx’s fees start as early as Oct. 5 and run through mid-January. The earlier fees are on large packages and those that require additional handling.

The surcharges on SmartPost will run $1 on all those shipments starting Nov. 2, and rise to $2 a package during Cyber Week, typically one of the busiest shipping weeks as it follows Black Friday sales.

While SmartPost has historically used the post office for deliveries to homes, FedEx is increasingly keeping those packages in its ground network. The company is looking to have more packages on residential routes after cutting ties with Amazon.com Inc. last year.

Another set of surcharges applies to customers who ship out more than 35,000 packages a week. The fees range from $1 to $5 a package, based on how high the customer’s weekly shipping volume is, compared with before the pandemic caused a rise in shipping levels.

 

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