Effective June 21, FedEx Corp. (NYSE:FDX) will stick it to its customers in the form of significant percentage increases to three delivery surcharges.
FedEx’s residential delivery surcharges on domestic air and ground deliveries will double from 30 cents per package to 60 cents per package. Separately, FedEx will raise the surcharge on its rebranded Ground Economy service to $1 per parcel from 75 cents. The service was formerly known as SmartPost before FedEx ended its last-mile delivery partnership with the U.S. Postal Service and took all of that business in-house.
In addition, the carrier will increase its “additional handling” surcharge to $3.50 per parcel from $3 on domestic air and ground deliveries, as well as international ground deliveries. Parcels are typically hit with an additional handling surcharge if they present weight, dimensional or other shipping characteristics that FedEx considers unfavorable to the efficient operation of its network.
In a related move, FedEx will maintain its $30 per-piece surcharge on oversized shipments moving in U.S. air and ground services, and international ground deliveries. That charge took effect in mid-January.
The three increases will be in effect from June 21 until further notice, FedEx said in a website posting Friday. The changes were classified as “peak” surcharges, which underscores that in the unprecedented environment for package deliveries during the post-COVID-19 era, peak season is no longer associated with the Christmastime holidays but has become a year-round phenomenon. The sellers market for parcel-delivery services has never been hotter than it is today, and all carriers have as much traffic as they can handle.
Trevor Outman, co-CEO of parcel consultancy Shipware LLC, said the surcharge increases are certain to erode the margins of customers that ship online orders directly to consumers. Residential surcharges are the most common of the charges known as accessorials because they are assessed separately from the carriers’ base rate.
FedEx has maintained that its surcharges are justified because its cost to serve has escalated dramatically with the massive spike in e-commerce ordering. While virtually all FedEx stakeholders acknowledge that the company faces higher pickup and delivery costs, they contend that FedEx and archrival UPS Inc. (NYSE:UPS) are using the surcharges to fatten their income statements instead of passing on higher service costs to their shippers.
Company executives have said on analyst calls that delivery surcharges will play an increasingly important role in the company’s drive to boost profitable revenue.