Effective January 2, 2023, FedEx Express (Domestic, US Export and US Import), FedEx Ground, and FedEx Home Delivery shipping rates will increase by an average of 6.9%.
FedEx Freight will increase rates by 6.9% for PZONE/EZONE base rate shippers and 7.9% for FXF 1000/501 base rate shippers.
Remember, there is often a discrepancy between the announced increases and the effect that the increase has on individual shippers.
Our team at Shipware has identified several important takeaways for shippers to take note of and assess:
1. Record high rate increase for 2023
After breaking the decade-long trend of a 4.9% increase with a 5.9% increase in 2022, FedEx adds another point to their GRI for 2023, with Brie Carere, Chief Customer Officer, citing “the inflationary backdrop” as the rationale for the historic increase. Raj Subramaniam also said, “we did not anticipate…the tremendous inflation of costs that hit us squarely last year.” Both of these statements were answers to questions during FedEx’s Q1 2023 earnings call on September 22.
In 2009, FedEx increased its express rates by 6.9% but offset the increase by reducing the fuel surcharge by 2 percent. Notably, fuel was not changed in this year’s announcement.
It will be interesting to see if UPS matches the 6.9% increase. My guess is UPS is currently adjusting their 2023 rates from a 5.9% increase to a 6.9% increase.
2. Most common surcharges increase by more than the announced 6.9%
Remember, the 6.9% in the headline does not include surcharges. This year, just like every year, surcharges increase by much higher percentages than 6.9%.
In 2023, the Home Delivery Residential surcharge is increasing by over 8%. Delivery Area Surcharges for Home Delivery will increase by 10%+. AHS and Oversize continue to soar with double-digit increases. Even the late payment fee is going up by 33% to 8%!
3. The ground minimum package charge (zone 2, 1 pound list rate) increased by 7.9% to $10.10
The ground minimum is increasing by higher than the overall average. This happens just about every year. This number is negotiable so shippers should look for a concession.
4. FedEx creates Remote Surcharge for certain contiguous US zip codes.
UPS introduced this fee in January 2022 and FedEx is following effective January 30, 2023. Almost 4,000 zip codes in the continental US will have a $13.25 fee added for any delivery. The fee is the same for commercial and residential shipments.
5. Increases are similar across weights but longer zones get a higher increase
Last year, the increase was similar across zones but this year, FedEx is increasing the rates for longer zones (6-8) more than for closer zones. The increase by weight ranges is consistent this year, unlike last year, when lighter weights had a much higher increase in comparison to heavier weights.
6. Some Ground Economy fees did not change
As of September 26, FedEx opted not to increase the Delivery and Returns fee and the Delivery Area Surcharge for Ground Economy.
How will this affect individual shippers?
The General Rate Increase will affect some shippers more than others since it’s not a linear increase.
If you’re a shipper that:
- Ships large packages
- Has a high percentage of long zone shipments
- Or, incurs significant accessorial charges as a percentage of overall spend
…it is likely that you will be subject to an increase much larger than the stated 6.9%.
For example, last year, shippers that used Ground Economy heavily saw increases over 15% because of the delivery and returns fee.
As is the case annually with rate increases, it is vital to understand how all the combined changes will impact your individual characteristics and ultimately your overall shipping costs. When you put the analysis together, you can have an informed conversation with FedEx about mitigating the increase.
This article first appeared in PARCEL.
Keith Myers is a Senior Consultant for Shipware, a parcel consulting firm that specializes in cost reduction and recovery services. Prior to his work at Shipware, Keith spent seven years as a Senior Pricing Advisor at FedEx, where he analyzed parcel and LTL programs for accounts up to $100M in spend. Keith earned an MBA with certificate in Supply Chain Management from Northeastern University. He can be reached at [email protected].