FedEx SmartPost to Raise Rates Again?
UPDATE: The USPS just announced it's delaying the implementation of the pending rate increase (which affects FedEx) due to Postal Regulatory Commission requests for additional information to justify the increases, so it will be interesting to see if FedEx SmartPost proceeds with its increases. It also remains to be seen how FedEx SmartPost will implement the increases. Will it raise published pricing so it's higher than ground for the first time ever, or bake the rate hikes into discounts — i.e., decrease incentives to offset the increase?
It will also be interesting to see how other parcel select carriers respond to FedEx's rate actions. The next largest player is UPS Surepost. Using history as our guide, whenever one of these two carriers announces a rate increase, the other follows with the same announcement. The aggregate sum of all these increases will have a dramatic adverse impact on B-to-C shippers!
ORIGINAL POST: While FedEx SmartPost hasn't made any public announcements as of this publication, select customers have received written notifications of a price change effective April 27, 2015. Early indications are that FedEx intends to increase SmartPost rates by 8.3 percent.
This news comes on the heels of the average 4.9 percent increase on the FedEx deferred ground product that took effect Jan. 4, 2015. However, it should be noted that lightweight packages — one pound to 10 pounds, which represent 95 percent of FedEx SmartPost packages — took an increase of 6.2 percent, which of course is much higher than the "average" (see Chart 1 below).
The Postal Service filed a rate change with the Postal Regulatory Commission on Jan. 26, 2015. Rate increases for Parcel Select, the Postal Service's bulk ground shipping product, will increase an average of 7.3 percent for destination-entered parcels. However, lighter weight packages will increase more than the average (see Chart 2 below). Today, approximately 98 percent of FedEx SmartPost packages are destination entered.
Rob Martinez is the CEO of Shipware LLC, a professional services firm that transforms businesses through intelligent distribution solutions and strategies. Rob has helped some of the world’s most recognizable brands reduce parcel shipping costs an average of 25 percent through contract negotiations, rate benchmarking, modal optimization, invoice audit and other savings vehicles. A cum laude graduate of UCLA, Rob has 20 years of transportation industry experience, including executive positions at DHL and Stamps.com, in addition to his work as an outside consultant since 2001.