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FedEx foregoes holiday surcharges in direct contrast with UPS

By Jennifer McKevitt / / August 7th, 2017

Dive Brief:

  • FedEx is choosing to waive additional charges for holiday packages this year as it intensified its competition with UPS to gain a bigger share of the e-commerce delivery market, CNBC reported last week.
  • The company will levy increased charges only for oversized (a $25 fee), unauthorized ($300), and those packages requiring additional handling ($3). 
  • UPS, meanwhile, announced a peak season surcharge of $0.27 for residential deliveries, commencing on Nov. 19 and lasting through Dec. 2. As of Dec. 17, the fees will rise to at least $0.81 and up to $0.97 for overnight, second- or third-day residential deliveries. Additional fees will be applied for oversized packages.

Dive Insight:

Since roughly 2006, and for a decade after,  FedEx and UPS matched each other in ground shipping rates. Now, as the companies adapt to rising e-commerce sales, customers are seeing a divergence, the effects of which should be interesting to calculate post-holiday.

FedEx's choice to maintain its rates could be driven by a need to recoup market share as UPS cuts into FedEx's gains from Saturday delivery. FedEx previously benefited from a lack of competition in the weekend delivery space, which was popular among e-commerce customers. However, UPS entered the Saturday delivery market last year, and intends to grow its presence to 4,700 U.S. cities by this year's holiday season.

Perhaps as a result of this, FedEx appears to be actively undercutting UPS in its bid to secure profits. While the company did not directly address competition, the surcharge announcement shows the companies may be targeting different audiences. The Wall Street Journal reports UPS CEO David Abney believes surcharges are necessary to control capacity during peak season and could bring in up to millions of dollars in revenue. FedEx, meanwhile, argues its strategy was made for the "millions of loyal small business customers and consumers shipping holiday gifts" during the season.

The small-business focus is consistent with other FedEx announcements. In February, FedEx Supply Chain launched a fulfillment and inventory management service, allowing customers to store their products at FedEx warehouses for servicing. In July, the company announced it had seen a $2.7 billion increase in revenue during FY 2017, largely due to e-commerce, heavy freight handling, and its acquisition of TNT Express.

While the company recently suffered a setback from a cyberattack, FedEx appears to be positioning itself as the small-business carrier of choice for 2017.

FedEx Outline of 2017 Increases - Updated August 3rd, 2017 - 24/7 Support including Chat

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