FedEx to Implement a New Peak Surcharge on Express Shipments

To handle the growing ecommerce consumer demand, FedEx has announced a new peak surcharge on express and domestic residential ground shipments, as it continues to bear the brunt of the pandemic. Let’s look at what the company is planning to do.

As the COVID-19 pandemic set in, the ecommerce market proliferated. More and more U.S. consumers opted for ecommerce throughout the pandemic phase. The increased consumer demand resulted in a surge in package volume and further exhausted the delivery capacity of FedEx, UPS, and other logistics companies. The online ecommerce traffic meant excessive strain on some of the biggest logistic giants. To withstand the aftermath of the pandemic and help manage capacity, many carriers utilized surcharges as a way out of this dire situation. 

In June 2020, FedEx warnedOpens a new window that peak surcharges would be “the new normal,” as the ecommerce volume showed no signs of slowing down at the time. FedEx stood by its words, as it increased peak surcharges on multiple occasions in the months that followed the June 2020 announcement.

In August 2020, FedEx announcedOpens a new window surcharges for the holiday shopping season amid the pandemic. The surcharges were applicable for the holiday volume, scheduled to stay in place between November 2, 2020, and January 17, 2021. In September 2020, FedEx announcedOpens a new window that it will introduce three surcharges on January 18, 2021, including changes to how the additional handling surcharge is assessed for FedEx Express and FedEx Ground for packages greater than 105 inches in length and girth. And in December 2020, the logistics company announcedOpens a new window  a new fee covering SmartPost shipments, which would take effect from January 18 until further notice.

Other major logistic companies like UPS also announcedOpens a new window  new surcharges on multiple occasions throughout 2020, as the network capacity of the provider was tested to limits by the elevated package volumes.

FedEx’s Plans for 2021

Following this development, FedEx announcedOpens a new window that it will now implement a new peak surcharge on Express and domestic residential Ground shipments, as it continued to battle with “elevated volume” as a consequence of the pandemic. 

The surcharge will impact shippers that had scheduled a weekly average volume of about 30,000 plus packages between January 3 and January 31. The fee will take effect from February 15, 2021, and will stay into effect until further notice, the carrier said. Shippers falling under this category will be charged 30 cents per Express and Ground residential package, while the SmartPost and One Rate packages in the Ground network are excluded from the new fee, according to a rate update. As the peak season has just gone by, the updates on the new surcharges seem to indicate how FedEx plans to rely on these additional fees to manage its network moving forward and compensate for the pandemic period at the same time.

In an earnings call last month, FedEx chief marketing and communications officer Brie Carere noted that the surcharges helped offset other costs related to elevated package volume and the pandemic. He implied that the surcharges “played a critical role in the company’s revenue quality strategy this peak.” “We believe surcharges will be a part of our pricing strategy moving forward for e-commerce,” Carere said. “They are a necessary part.”

Dean Maciuba, a managing partner at Last Mile Experts, said in a LinkedIn postOpens a new window  on Friday that it is plausible for FedEx to issue additional fees as they can potentially target a larger customer base going forward. “FedEx assumes that these large customers will accept the price increases and just pass on the added cost to their customers,” Maciuba wrote. “However, it is difficult for large ecommerce merchants to pass on the rate increase to the consumer, without compromising the free shipping component of the ecommerce value proposition.”

In Conclusion

The COVID-19 pandemic has created record-breaking ecommerce orders and shipment volumes. FedEx is observed to have continued to keep commerce moving and delivering critical shipments even during the tough pandemic phase. ​As the pandemic’s impact continued to generate elevated volumes, FedEx experienced high demand for capacity and increased operating costs across its supply chain network. 

To continue providing customers with the best possible service during this challenging time, the logistic provider announced Ground, Express surcharges, effective February 15, 2021, until further notice. However, FedEx’s surcharge announcement, in a way, confirms the suspicions over the fact that the endless parcel peak surcharges of 2020 will continue into 2021 as the consumer ecommerce demand continues to grow in the initial phases of 2021.

Do you think FedEx will compensate for the pandemic loss by introducing the new peak surcharges? Comment below or let us know on LinkedInOpens a new window , TwitterOpens a new window , or FacebookOpens a new window . We’d love to hear from you!