FedEx Adds New Delivery Fees to Manage Strain From Coronavirus -- Update
03 June 2020 - 9:49PM
Dow Jones News
By Paul Ziobro
FedEx Corp. is adding surcharges to some shipments in the U.S.,
following rival United Parcel Service Inc. in charging more to
offset rising costs and manage a surge of packages flowing through
its network during the coronavirus pandemic.
The fees are designed to hit some of the largest shippers whose
volume has exploded as consumers have hunkered down and ordered
everything from cleaning supplies to computer monitors during a
broad nationwide lockdown.
The move will force the shippers to either absorb the costs as
their own expenses rise to manage through the pandemic or pass them
on to consumers through higher prices.
Starting June 8, FedEx is adding a surcharge of 30 cents to all
packages headed to homes. It applies to customers who send more
than 40,000 packages a week if their weekly shipping volume is more
than 120% of its average volume in February, a person familiar with
the matter said.
FedEx will also start charging $30 extra for all oversize
deliveries, two people familiar with the matter said.
A final surcharge will tag 40 cents onto all packages shipped
using SmartPost, these people said, where FedEx deposits packages
to the U.S. Postal Service for delivery to homes. FedEx is winding
down that service this year and incorporating more of those
packages into its ground network.
Delivery companies like FedEx and UPS are seeing their shipping
volumes surge to levels normally seen around Christmas. At the same
time, thousands of businesses deemed nonessential have closed. That
has shifted shipping volume away from the more profitable business
stops, where drivers can drop off multiple packages, to residences,
which have fewer deliveries per route.
A FedEx spokeswoman said that the company routinely reviews
pricing against the current market conditions. "As the impact of
Covid-19 continues to generate a surge in residential deliveries
and oversized items, the peak surcharges will help us manage the
demand while maintaining strong levels of service for our
customers," the spokeswoman said.
FedEx's surcharges follow UPS, which this week began charging 30
cents per package shipped using some of its lower-priced services.
UPS's charges only apply to large customers that exceeded their
average weekly volume in February by more than 25,000 packages.
UPS is also adding a slightly higher surcharge on large packages
but it only applies when a customer ships more than 500 such
packages in a week.
Shippers generally have little room to pass on the higher costs
to shoppers, especially since some retailers like Amazon.com Inc.,
Target Corp. and Walmart Inc. offer free shipping on many items,
either through membership programs, loyalty programs or minimum
shipping thresholds.
"Almost invariably, the merchant will eat the higher costs,"
said Rob Martinez, co-chief executive of Shipware LLC, a shipping
strategy consultant and auditor. He estimates that the new UPS
surcharge on its lower-priced services will add about $32,250 in
costs to impacted customers.
A UPS spokesman declined to comment on the third-party
analysis.
Write to Paul Ziobro at Paul.Ziobro@wsj.com
(END) Dow Jones Newswires
June 03, 2020 16:34 ET (20:34 GMT)
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