FedEx Adds New Delivery Fees to Manage Strain From Coronavirus

by WSJ

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.