FedEx Announces 2018 General Rate Increase: What it Means for Retailers

This is a guest post from Dave Sullivan, a senior consultant for Shipware, a parcel consulting firm. 

FedEx Express, FedEx Ground and FedEx Freight, subsidiaries of FedEx Corp., will increase shipping rates effective Jan. 1, 2018 by an average of 4.9 percent. The change will impact the following:

• Express package and freight standard list rates for U.S., U.S. export and U.S. import services.
• FedEx Ground and Home Delivery standard list rates.
• FedEx Freight rates.

Potentially one of the most impactful changes comes with the announcement that FedEx will begin applying a dimensional weight (DIM) factor of 139 to all SmartPost packages. This change will become effective on Jan. 22, 2018. The change will align SmartPost dimensional weight pricing with that of FedEx Express and FedEx Ground. It also more closely aligns FedEx SmartPost dimensional weight pricing with that of UPS SurePost, although UPS still has a higher DIM factor for packages measuring less than one cubic foot. (As of this writing, UPS hasn't announced its 2018 rate changes.)

Looking at a few examples can help illustrate the impact of this change. Consider the following three SmartPost packages, all rated using the nondiscounted FedEx SmartPost rates for zone five. The examples compare the 2017, nondimensionalized rate to the 2018 dimensionalized rate. The percentage cost increase is significant, and illustrates why the 4.9 percent announced average should be taken with a grain of salt and why changes to DIM pricing are often more impactful than other changes.

In addition, there will be changes to FedEx surcharges and other fees, also effective on Jan. 1. Notable changes for 2018 include the following:

• The addition of a third-party billing surcharge of 2.5 percent of the total shipment charge for any shipment billed to a third party. The charge will apply to Express and Ground U.S. and international shipments. This more closely aligns FedEx with UPS.
• The Additional Handling Surcharge for U.S. and International Express will now apply to any package that measures greater than 48 inches on its longest side, which is a change from 60 inches in 2017.
• The minimum net charge for a ground package will increase to $7.58 from $7.25.

Here are some highlights from the announcement, showing the changes to some of the more common surcharges, along with the percentage increase. As in recent years, the largest increases continue to be reserved for those surcharges related to package size and dimensions.

Most shippers understand by now that there's usually very little correlation between the carriers’ announced average increase and the actual increase by service level, zone and weight. Additionally, shippers understand that the impact to their parcel budget can vary significantly from the announced average increase. The devil is in the details. A more thorough analysis by Shipware’s team of consultants will be forthcoming once the complete rate announcement can be digested.