FedEx announced their annual rate increase in mid-September 2020, slightly earlier than usual announcements of this nature. FedEx Express, FedEx Ground, and FedEx Home Delivery shipping rates will across the board increase by 4.9%. As with most years, a 4.9% increase might be more or less for a merchant, depending on their shipping profile. Most changes take effect on January 4th, 2021, although some changes are staggered. They are noted below if the date differs from January 4th.
Some important changes are noted below:
- 4.9% does not always mean 4.9%. As noted above, the 4.9% average can differ depending on the shipment profile. A 1-5lb Ground Commercial package, for example, could see a 6-6.6% year-over-year increase. Whereas a 2DAY AM package exceeding 30 pounds could see an increase of more than 7%. It is then critical for the merchant to know their specific shipping profile to understand the true effect of these changes.
- Minimum Package Charge. The minimum package charge for FedEx Ground will increase to $8.76. This is important to note; the minimum billable amount is the lowest amount the carrier will charge for a shipment. This represents an approximate 6% increase from the previous year’s minimum package charge. Note that exceptions to the minimum package charge can occur, depending on what a merchant has negotiated with their carrier.
- Every year there is an increased focus on large packages or shipments with unusual dimensions. These shipments represent an opportunity cost versus a denser or lighter shipment that the carrier can carry in its place. In 2021, the Additional Handling surcharge based on dimensions will have a threshold of 105 inches in combined length plus girth (Girth =2 x height + 2 x width, so it becomes length + 2 x height + 2 x width < 105). Note that this change will occur on January 18th, 2021. Additional handling surcharges based on dimensions are also increasing in cost, as the surcharges for additional handling-weight, additional handling-packaging, and additional packaging-dimensions are all increasing more than 6% year over year.
- Late Fee. In 2021, FedEx will institute a 6% late payment penalty for exceeding their 15 day payment terms. It is important to note that individual merchant-shipper contracts may have different terms that can be discussed between the carrier and merchant.
- Surcharges. Some surcharges are increasing by as much as 9%. As is consistent with most general rate increases, surcharges are increasing more than the year over year increases of transportation costs. The oversize charge for FedEx Ground Home Delivery, for example, is increasing from $120 to $130, while the delivery area surcharge for extended Home Delivery Residential Services is increasing from $5.40 to $5.90. Both of these changes are over 8% increases year over year.
What Does This Mean For Me as a Merchant?
It is critical that the merchant has a strong relationship and level of communication with their carrier. Additionally, it is essential that the merchant knows their own shipping profile and how increases to shipping costs and surcharges affect the shipping costs of their specific products. Lastly, having the right technology tools that can help to identify the right shipping options for your needs becomes essential in saving time and money.