FedEx Corp. this week announced higher service fees and its base rate change for 2016.
Effective Jan. 4, 2016, the shipper’s base rates will rise an average of 4.9% for FedEx Ground and FedEx Home Delivery. That is the same percentage FedEx and rival UPS Inc. raised rates for this year.
FedEx also announced a slate of increases for accessorial fees, which are for services other than driving, such as a destination fees, waiting time or hazardous waste handling. Those fees will also take effect in January. For example, the delivery area surcharge for residential deliveries for FedEx Home Delivery will rise to $3.15 from $3 per package. The fee to correct an address for Express or Ground deliveries will rise to $13 from $12.50. See the details on all FedEx fee changes here.
FedEx also plans to put one fee change into effect Nov. 2, ahead of the peak holiday shipping season. The shipper will charge $110 for each unauthorized package shipped by FedEx Ground, which are packages that are larger or heavier than FedEx’s service guidelines allow. That’s a significant jump from the previous $57.50 fee FedEx charged. It is FedEx Ground’s decision whether to deliver the package, refuse it or return it to the sender. Packages greater than 108 inches in length or heavier than 150 pounds are considered unauthorized.
The unauthorized package fee increase stemmed from the shipper seeing more of those types of packages, said Mike Glenn, president and CEO of FedEx Services, today during the company’s earnings call. “More e-commerce companies are electing to ship those packages through networks like ours rather than handle them in the store,” he said, adding that FedEx is working with individual customers who send such large packages.
Glenn said FedEx also is working with e-retail shippers to understand their shipping needs during the holidays and especially during the seven to 10 day peak volume period. “We are working very closely with customers to make sure we understand their forecast, where necessary we will have to put some caps in place as we have to do every year and we see nothing different in that regard and customers are requesting more capacity not less,” he said, according to a transcript from SeekingAlpha. The company did not directly announce any peak season surcharges, and a call to FedEx to confirm it would not implement a seasonal surcharge was not immediately returned. UPS has said shippers that ship more than expected will face fees during the holiday season.
The new slate of fees was announced Tuesday, ahead of FedEx’s first quarter earnings release Wednesday. That release showed that the money FedEx made per domestic package slipped 3% from a year earlier and dipped 7% for international packages.
For FedEx’s fiscal Q1, which ended Aug. 31, the company further reported:
- Revenue of $12.28 billion, up 5.1% from $11.68 billion a year earlier.
- Net income of $692.0 million, up 6.0% from $653.0 million a year earlier.
- Average daily package volume was 6.717 million for the 65 operating weekdays of the quarter versus 6.456 million for the 64 days in the corresponding period a year earlier. This metric includes only the operations of FedEx Ground and FedEx SmartPost. SmartPost is a service in which FedEx typically hands parcels off to the U.S. Postal Service for final delivery.
The company is working on implementing a software program that will help it optimize the delivery of SmartPost and Ground packages destined for the same address on the same day, executives said during the earnings call. “Instead of one being delivered on a [FedEx] vehicle and the other being delivered through the postal service, there is fairly significant operating expense savings to that,” Glenn said. “In addition, the ability to maximize the use of SmartPost assets and Ground assets, particularly at peak provide us with significant opportunities to reduce our operating expense going forward.”