In June, UPS announced a new peak season charge applicable during selected weeks in November and December 2017 for U.S. Residential, Large Packages and packages Over Maximum Limits. The increase means that every residential package shipped at some point during the 2017 Christmas holiday will incur price increases.
Residential packages will increase as follows:
- UPS Next Day Early, UPS Next Day Air, UPS Next Day Air Saver: $.81 per package, Dec 17-23, 2017
- UPS 2nd Day Air A.M., UPS 2nd Day Air, UPS 3 Day Select: $.97 per package, Dec 17-23, 2017
- UPS Ground (including Ground with Freight Pricing): $.27 per package, Nov 19-Dec 2, 2017 and Dec 17-23, 2017.
- UPS SurePost: $.36 per package, Nov 19-Dec 2, 2017 and Dec 17-23, 2017.
- Residential packages shipped from an origin within the 48 contiguous states to a destination within Alaska, Hawaii, or Puerto Rico will increase $2.99 for all services Nov 19-Dec 2, 2017 and Dec 17-23, 2017.
- Large Package Surcharges (length plus girth over 130 inches) will increase an additional $24.00 Nov 19-Dec 23, 2017.
- Over Maximum Limits surcharges (actual weight over 150 pounds, single side over 108 inches, or over 165 inches in length plus girth) will increase an additional $249.00 Nov 19-Dec 23, 2017.
Click here to download peak surcharges dates and amounts directly from the UPS website.
Two months following the UPS announcement, FedEx announced modest increases to only oversized items.
The following FedEx surcharge increases will take effect during the holiday shipping period of Nov. 20, 2017-Dec. 24, 2017:
- Additional Handling Surcharge: Will increase $3 (27.3%) to $14
- Oversize Charge: Will increase $25 (34.5%) to $97.50
- Ground Unauthorized Package Charge: Will increase $300 (260.9%) to $415
Details of the FedEx surcharges are available at http://www.fedex.com/rates2017.
It is not surprising that FedEx would concentrate its temporary holiday surcharge increases to oversize packages. In fact, oversized shipments during the holiday season have increased 240% at FedEx in the past 10 years. These oversized packages now make up 10% of the volume in the FedEx Ground Network.
In fact, Amazon, FedEx and UPS have each experienced increased demand for transportation of larger and heavier packages. With the growth of ecommerce, demand for oversized shipments (mattresses, basketball rim/backboards, trampolines, large-screen TVs, large appliances, etc.) have required network re-engineering as most of these larger items are not transportable by conveyor belt. In fact, each of these companies have had to create both permanent — as well as temporary facilities during peak — entirely dedicated to the sortation of oversized packages.
These changes are costing shippers more. In 2016, both FedEx and UPS announced new surcharges for “unauthorized” and “over maximum limits” to be applied to overly large and/or heavy pieces, which disrupt operations and require the carriers to incur additional handling costs.
By focusing temporary holiday increases on oversized packages, FedEx can recover added costs of handling oversize packages – or encourage shippers of these large, heavy, hard-to-handle packages to find another carrier.
While the holiday increases on oversize packages was anticipated, FedEx did not, however, adjust Residential surcharges. Whereas UPS customers will pay an additional surcharge anywhere between $.27 and $2.99 for each package, the FedEx residential surcharge will not change during the 2017 holiday shipping season.
For FedEx, a bird in the hand is not worth two in the bush. While FedEx would have enjoyed tens of millions of dollars in incremental revenue by simply matching the UPS peak surcharge for residential shipments, FedEx is banking on gaining new customers – a move that allows FedEx perhaps to gain new market share worth hundreds of millions or more.
However, rather e-commerce business flooding from UPS to FedEx, I anticipate the effect to be that UPS simply won’t be able to get away with 100% of the increases. Now that shippers have a choice and clear price difference, UPS customers will have greater leverage to negotiate concessions to the temporary holiday rate hikes. In other words, UPS shippers will give UPS a chance to adjust the increase before they’d switch to FedEx.