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US parcel shippers are getting hit with more price hikes, this time on the domestic front.
After a round of additional levies on international parcel shipments in April, FedEx and UPS are now implementing domestic surcharges at short notice.
The pair moved in their customary two-step: UPS jumped first, announcing surcharges from 31 May; FedEx followed on 3 June with similar charges, effective from 8 June.
“UPS does it. If FedEx doesn’t match it, something is wrong in the world,” said John Haber, CEO of Spend Management, a consultancy on logistics spend, based in Atlanta.
UPS led the way with a 30 cent levy per parcel in its Ground Residential and SurePost services. (The latter uses the US Postal Service for final-mile delivery.) In addition, there is a surcharge of $31.45 per shipment on parcels with a length in excess of 96 inches or length plus girth exceeding 130 inches.
FedEx followed suit with surcharges of 40 cents for parcels shipped through SmartPost (its equivalent to SurePost) and a peak residential delivery surcharge of 30 cents per package. Like UPS, it also introduced a surcharge on outsize parcels, with dimensional limits identical, but FedEx charges slightly less, at $30 per outsize package.
The new surcharges mainly target large shippers, as the levies on regular parcels have volume thresholds that spare SME shippers.
FedEx’s peak residential charge applies to customers that ship 40,000 parcels in any given week on the company’s residential delivery services and whose volume in that week is over 120% of their average weekly volume from February.
The new UPS surcharges hit shippers of regular size parcels that have increased their volume by more than 25,000 packages since February. Its levy on outsize packages kicks in with the 501st monthly shipment, Mr Haber noted.
“There are not many shippers that fit these two categories,” he said, adding that the surge in package volume from large retailers has been the biggest factor in the rise of residential deliveries for the integrators. UPS saw B2C traffic shoot up from about half its volume to 70% in the first quarter.
The rise of B2C volumes has put downward pressure on the integrators’ margins and overwhelmed their networks, creating additional cost pressures.
“As the impact of the virus continues to generate a surge in residential deliveries and has also generated a surge in oversize, hard-to-handle packages, we have experienced increased operating costs across out network,” FedEx said in its announcement of the new charges.
Mr Haber does not question the validity of the argument, but he criticised the timing – particularly with FedEx, which gave notice of the new charges on 3 June. With the levies coming into effect on 8 June, shippers were effectively given less than three working days to respond.
“They should have given people a warning,” he said. “There is no time for people to make contingency plans.”
Shippers can try to negotiate with FedEx; they can shift volume to an alternative provider if they have one, or they can try to find one. Each of these options takes time and is unlikely to avert the initial hit, which can be substantial, he said.
“We have clients who ship one million packages a month,” he added.
For many large retail companies, this blow comes at a difficult time. Brick-and-mortar retailers have been hammered by the pandemic, with e-commerce their current lifeline in many cases, explained Mr Haber, adding that he expects that pain to continue.
“I think we’re going to see prices continue to increase,” he warned. “DHL eCommerce is going to look at it; Pitney Bowes is going is going to look at it.”
One trend that may alleviate the upward pressure on parcel rates is the increased interest from large forwarders and 3PLs in adding parcel shipping capabilities to their portfolio.
“Most 3PLs don’t have capabilities in the parcel business, and it’s the fastest-growing sector. We’re going to see a lot of consolidation,” Mr Haber predicted.
Comment on this article
Jay Z
June 06, 2020 at 10:14 pmThe USPS is really messed from COVID 19, packages are taking forever, so I’m avoiding merchants who use them as a sole source, hence I’m avoiding Surepost and Smartpost services, UPS and FedEx are currently slow with normal delivery, add in the post office, and forget it. I have always forgone a purchase from a merchant if I feel their shipping is high, If shipping becomes high in general anything I do not need or can be bought for free ship to store or purchased directly at a retail store I’ll buy. Right now Amazon Prime is my first choice, Amazon is doing well with their own internal shipping. UPS and FedEx are being very greedy, and are only hurting their customers as I will buying less. Business is booming for UPS and FedEx. Tier greed sad, though what comes around goes around, UPS and FedEx CEOs will feel the repercussions financially or other.
Shawn
June 06, 2020 at 11:18 pmI hate using UPS! There no faster then USPS in most cases when ordering items that come from the US to Canada… And UPS seems to always add large Brokerage Fees that pop up last sec… That you don’t get using other services.
Neal
June 07, 2020 at 1:36 amPlease let people know that these surcharges DO NOT apply to shipments made through The UPS Store network. We are still here, and have been, to help!
Greg Pitchure
June 07, 2020 at 3:46 amWhy doesn’t USPS step up to the plate and become a true competitor in the domestic parcel service in America. It’s a tough spot to fill. DHL failed at it miserably, but with the pockets of Trump the USPS could turn into a tax payer asset, and not a liability. Starting with standing up to Amazon. Which leads me to the next comment. Will Amazon become a 3rd competitive parcel company in the USA? Maybe acuire Big Brown, FedEx, or even DHL?
Charles Ray
June 07, 2020 at 10:04 amUSPS isn’t a “tax payer liability”! Never was, and never will be! They have been a “player” in parcel industry! Most companies would benefit more using the Post Office but they probably have to break their contract with UPS or FedEx to do so.
I am really amazed that companies, like Amazon, shipping items in oversized packaging. And that consumers need everything everything last week!
P
June 07, 2020 at 6:46 pmWell unlike any other company y or service ,the U.S. government made the USPS pay for all employees retirement plans up front which cost billions of dollars and almost bankrupt the system completely for the next 50 yrs. So no unless this is overturned and the USPS is allowed to pat I to retirement fu FSA like any other company, they will not be a competitor for shipping. They may bot ve able to stay in business as it without a pandemic, never mind having to keep up in one.
Sal
June 08, 2020 at 12:45 amWe ‘ll see what happens with the new Trump picked Postmaster starting in the middle of June. Just for your info the PO is being pounded by parcels, just like everybody else. Plenty of Amazon gets delivered thru the PO
Simplord9000
June 08, 2020 at 12:54 amWell first off, the USPS was a tier above all the other shippers…. Until FedEx cried to Congress about the USPS having a shipping monopoly. That forced the USPS to give up it’s owned aircraft and use FedEx planes lol.
Second, oversight from Congress sets prices for the USPS. And on top of that, the USPS is not tax payer funded, or has no attachment to Trump.
Third, the USPS was profitable almost since it’s inception 200 years ago… Until 2006 when Congress forced it to prefund it’s retiree benefits for 50 plus years into the future.
Essentially the USPS has been chipped away from it’s former glory by petty politicians who don’t know what they’re talking about, and who have ulterior motives.
Corey Hernandez
June 07, 2020 at 8:19 amTime to switch over to USPS.
John V Kiger
June 07, 2020 at 8:33 amFedRx gave notice in January that prices would ve increasing for larger packages. I.E. Furniture and Heavier packages. It was not a one week notice. Please do better research
Shellie M
June 07, 2020 at 9:28 amGREED
Cuong Khuu
June 07, 2020 at 1:51 pmThen ship with the US Postal Service. They are cheaper and faster than UPS and FedEx
Cuong Khuu
June 07, 2020 at 1:54 pmUSPS is cheaper and faster than UPS and FedEx
Mike
June 07, 2020 at 2:31 pmI work at a ups freight hub and we’re as busy as we are during the holidays. We’ve had to hire more people and deal with all of Amazon’s slack. No wonder.
Kim Cushman
June 07, 2020 at 3:28 pmThen tell them to stop giving all their money to Mitch McConnell, they are his biggest contributors…
Alex
July 23, 2020 at 6:25 pmCrooks. This comes at a time when gas prices are as low as they have been in years and demand is up. Where is the US gov on this to stop them from price gouging???