Online retailers will pay an average of 4.9% more for FedEx Ground service. UPS has not yet announced its 2018 rate increase.

FedEx Corp. on Tuesday said higher shipping rates will go into effect Jan. 1, with an average increase of 4.9%.

Rates for FedEx Ground, the category in which the bulk of e-commerce orders are handled, will rise an average of 4.9% starting the first of the year. FedEx is the shipping carrier for 318 retailers in the Internet Retailer 2017 Top 1000.

FedEx Express rates also will increase an average of 4.9% for U.S. domestic, U.S. export and U.S. import services, as will FedEx Freight charges. SmartPost rates also will increase, FedEx says.  SmartPost utilizes FedEx’s network for the initial leg of a parcel’s delivery and then hands off to the U.S. Postal Service for the final mile.

Other changes that will take effect Jan. 22, 2018, include:

  • A third-party billing surcharge for FedEx Express and FedEx Ground shipments billed to a third party. This means retail customers that ship under a vendor account or use drop shippers will pay a 2.5% fee, says Baris Tasdelen, senior transportation analyst at supply chain consulting firm enVista.
  • Criteria and pricing will change for packages that require additional handling, are oversized or are unauthorized.
  • FedEx SmartPost will apply dimensional weight pricing.

If a 4.9% rate increase sounds familiar, it is. That has been the average increase rolled out by FedEx and UPS Inc. for the past three years. UPS, which had new rates go into effect Dec. 26, has not announced its 2018 rate increase yet.

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The U.S. Postal Service, which is the primary carrier for 312 retailers in the Top 1000, raised rates 2.7% to 4.9% across its various services, effective Jan. 22, 2017.  The postal service, which does not impose surcharges, must have rate changes approved by the Postal Regulatory Commission, a government agency. In early 2016, the Postal Service raised its rates an average of 9.5% on several shipping products used by online retailers, following several years of no changes.

As part of FedEx’s 2017 rate increase announced last fall, the carrier changed the dimensional weight divisor, effective Jan. 2, for Express and Ground packages to 139 from 166, which made the divisor the same as it currently is for international packages. When SmartPost packages are subject to dimensional weight pricing starting Jan. 22, the divisor of 139 (also called the “DIM factor”) will apply. “Shippers who use this service should reach out to FedEx and request a higher DIM factor,” Tasdelen says.

Using 139 instead of 166 as the divisor for dimensional weight calculations amounted to about a 20% increase in billable weight for online retailers that don’t have a custom dimensional factor in their carrier contracts, says Brian Broadhurst, vice president of transportation solutions with transportation spend management consultancy Spend Management Experts.

Rising shipping fees are a regular part of business. Fall is the time of year when FedEx and UPS reveal their broader, annual increases, but they make tweaks throughout the year.

In August, FedEx said it would not—unlike rival UPS—impose a broad holiday surcharge on packages shipped via FedEx Ground or Express from Nov. 20-Dec. 24. But it will charge additional fees on items that are oversized, require special handling or are unauthorized. Most packages do not fall into those categories, but the carrier says the large-package surcharge is meant to help FedEx deal with a category of packages that has grown by 240% since 2007.

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UPS, listed as the primary carrier for 421 retailers in the Top 1000, in June announced that it would charge additional fees for packages shipped during the peak holiday season. The biggest impact will be on packages shipped just before Christmas, from Dec. 17-23, when UPS will impose a 97-cent surcharge on packages shipped via 2ndDay Air Residential and 3rd Day Select Residential; an 81-cent surcharge on items shipped via Next Day Air Residential; and a 27-cent surcharge on  items shipped via Ground Residential. There also will be a 27-cent surcharge on all packages shipped via Ground Residential from Nov. 19-Dec. 2.

An Internet Retailer survey of merchants in the Top 1000 find fulfillment and shipping cost increases to be mostly in line with their expectations.

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