FedEx will ring in new year with price hikes, surcharges

FedEx Express, Ground and Freight will increase shipping rates by an average of about 4.9% or more, starting Jan. 4, 2021, the company announced Monday.

FedEx will introduce three surcharges on Jan. 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. FedEx Freight will introduce a High Cost Service Area Surcharge in some U.S. zip codes. And some U.S. locations will have an International Out-of-Delivery-Area Surcharge or an International Out-of-Pickup-Area Surcharge, when using FedEx International Express Freight.

Carrier rate hikes at the end or beginning of the year are not unusual. FedEx’s rate hikes are around the same level as its increases at the end of 2019.

FedEx said the increases allow it to invest in “service enhancement, fleet maintenance, technology innovations and other areas.”

The announcement comes amid hectic times for FedEx. The pandemic resulted in cratered commercial business while the carrier saw a big uptick in residential delivery due to lockdowns and stay-at-home orders.

“FedEx Ground network has been teeming with peak-like residential volume for the past few months,” FedEx COO Raj Subramaniam said in July. “Commercial volumes hit bottom in middle of April.”

FedEx instituted a series of surcharges earlier in 2020 — which it referred to as “revenue quality actions” on a call with analysts — to help handle volume surges.

“These revenue quality actions are driving contribution to the bottom-line, while ensuring we deliver the outstanding experience that FedEx customers expect,” FedEx Chief Marketing and Communications Officer Brie Carere said in July. The charges took place in June and are listed as lasting “until further notice.”

Experts expect that, when the pandemic ends, some volumes that have gone to e-commerce will return to brick and mortar. But much of it will stay in the digital channels that rely on carriers, such as FedEx, for delivery.

UPS has increased surcharges throughout the year but has not made an announcement on overall rates for 2021. Last year, UPS increased its rates 4.9% in a November announcement.