FedEx Announces 2020 General Rate Increase

FedEx announced on Monday its annual general rate increase for 2020. Effective Jan. 6, 2020, FedEx Express (Domestic, U.S. Export and U.S. Import), FedEx Ground, and FedEx Home Delivery shipping rates will increase by an average of 4.9 percent, while FedEx Freight will increase rates by an average of 5.9 percent.

How will this affect individual shippers? There's often a discrepancy between the announced general rate increase and the effect that the increase has on individual shippers. If you’re a retailer that routinely ships large packages, long-zone express, three-day express, or ships to remote areas, it's likely that you'll be subject to an increase much larger than the stated 4.9 percent.

Our team at Shipware will perform a detailed analysis of the announced increases over the next week, but in the interim, here are some areas which will likely have the most impact:

FedEx Continues its Emphasis on Penalizing Large Packages in its Networks

Notably, Additional Handling — Dimensions and Weight and Oversize will see large increases:

• Additional Handling — Dimensions will increase by 11.1 percent to $15.
• Additional Handling — Weight will increase by 20 percent to $24.
• Oversize packages have now been broken out by service type. Express and Commercial Ground package rates will increase by 11.1 percent to $100, but home delivery will increase by 33.3 percent to $120.

FedEx Has Placed a New Emphasis on ‘Extended’ Delivery Area Surcharges (DAS).

ZIP codes designated as extended delivery area will incur a much larger increase than their nonextended DAS counterparts. Refer to the table below for the full breakdown of the increases.

• Standard DAS increases range from 4.7 percent to 9.6 percent.
• Extended DAS increases range from 16.1 percent to 27.8 percent.
• Note that DAS/Extended DAS ZIP codes have changed. Refer to the changes here: https://www.fedex.com/content/dam/fedex/us-united-states/services/DAS_Zip_Code_Changes.pdf.

The Ground Minimum Package Charge (Zone 2, 1-Pound List Rate) Has Increased by 4.84% to $8.23.

Commercial ground increases are similar across weights and zones:

Credit: Shipware

Longer Zones Have Larger Increases Than Shorter Zones for Express Services

This will generally affect shippers with one distribution center more significantly. This discrepancy can be seen in the chart below:

Credit: Shipware

3-Day Shipping Has a Larger Increase Than Other Services

Three day is often distributed on the same Two Day/Express network, and is likely close for FedEx in cost-to-serve, but with lower revenue for FedEx. Note the increases as displayed by weight vs. other services (increases across weights are similar):

Credit: Shipware

The following table shows the average increases by domestic service and the associated minimum charge increases:

Credit: Shipware

This table shows assessorial increases for FedEx’s most commonly assessed charges:

Credit: Shipware

Effective Jan. 20, 2020, new surcharge ratings will be in place. Some are likely to be impactful for many shippers and further emphasize FedEx’s stance on large packages. Here are the highlights:

• Additional Handling — Weight will now apply for domestic express and ground for packages with an actual weight greater than 50 pounds (down from 70 pounds). Seventy pounds is still the threshold for international export and international ground.
• Additional Handling — Dimension, Packaging and Weight will now apply to U.S. imports (greater than 70-pound actual weight is the threshold for imports/weight).
• Additional Handling — Freight will now apply to express shipments with a handling unit measuring greater than 62 inches along its longest side (previously 70 inches).
• Oversize will now apply to express U.S. international shipments, but will not have a 90-pound minimum billable weight (domestic and international ground are still subject to the 90-pound minimum billable weight).
• Fuel surcharges will now apply to Additional Handling surcharges (including peak for 2020), Collect on Delivery, and Signatures. Click here for the full details.

FedEx has also announced that it will not assess additional fees for residential shipped during the holidays, but will continue to assess incremental fees for additional handling ($4.10), oversize ($37.50), and unauthorized packages ($435).

As is the case with each annual rate increase, it's vital to understand how all changes combined will impact your individual characteristics and, ultimately, your overall shipping costs. However, understanding the financial impact to your organization isn't a simple or straightforward analysis. If you would like an in-depth understanding of how FedEx’s 2020 rate increases will affect your business, Shipware will perform a complimentary and customized analysis for your organization. Email inquiries@shipware.com to learn more.

Matt Bohn is a senior consultant, professional services at Shipware, LLC, where he works to optimize carrier contracts for high-volume shippers. Matt has nine years of previous experience as a revenue management advisor at FedEx, where he analyzed and developed contracts for some of the carrier's largest e-commerce shippers.