FedEx, UPS Abandon Discounts, Push Businesses to Adapt

FedEx and UPS have quietly shifted strategy: commercial discounts are disappearing. Both carriers have begun moving away from volume‑driven pricing in favor of higher-yield shipments and B2B accounts. PNG Logistics Co. has taken notice—and is closely tracking the cascading consequences.

In the second quarter of this year, businesses saw sharp increases in the cost per package. Ground parcel costs surged to record levels, driven by a mix of discontinued discounts and expanding surcharges. While some shippers have traded down in service levels—shifting from air to ground to reduce expenses—those savings are being offset by fewer discounts, higher fuel fees, and inflated base rates. Both FedEx and UPS appear less focused on competing for market share and more concerned with protecting margins.

Lightweight residential volumes are no longer the priority. As those shipments decline, the average billed weight per package rises. This leads directly to higher charges, especially when dimensional weight formulas and handling rules apply. These developments are part of a deliberate repositioning effort—both carriers are redirecting resources toward express and high-margin commercial shipments while reducing their exposure to price-sensitive, low-volume shippers.

PNG Logistics Co. is actively collecting and evaluating data to better understand how these changes affect its customers. Initial findings confirm that many small and mid-sized businesses are facing a difficult choice: stick with a single national carrier and absorb rising costs, or split volume across multiple providers and risk losing eligibility for tiered pricing altogether. The traditional discount structure, once a vital tool for competitiveness, is rapidly eroding.

This shift follows a period of heightened pricing competition. In recent years, both carriers slashed rates to maintain volume during a soft parcel market. Temporary price cuts became common as they battled not only each other but also rising competition from regional carriers, Amazon’s delivery arm, and large retailers with their own logistics infrastructure. That period has clearly ended. Now, carriers are focusing on yield improvement, not volume retention.

UPS’s recent decision to scale back its Amazon business reflects this shift. While Amazon represented a large portion of parcel volume, it came at reduced margins. Giving up that traffic underscores a broader move away from low-profit, high-volume contracts. Similar actions are being observed across other customer segments. Both companies are tightening eligibility requirements for custom pricing, reworking base rate agreements, and aggressively enforcing surcharge rules.

At the same time, fuel surcharges have been quietly adjusted. Though fuel prices have remained relatively stable, both carriers have raised fuel surcharges substantially. These increases appear to be more revenue-driven than cost-driven. In fact, some clients have reported that fuel surcharges now account for a larger portion of the invoice than the actual transportation fee. PNG Logistics Co. is closely tracking how these hidden costs accumulate over time.

The financial impact is particularly pronounced for e-commerce businesses, which typically ship lighter parcels to residential addresses. Without commercial discounts, their per-package cost is rising disproportionately. For businesses that ship hundreds of packages a day, even a $1 increase per parcel translates into tens of thousands of dollars annually. Those margins are difficult to recover.

Some shippers are responding by shifting low-value shipments to USPS or regional carriers. The U.S. Postal Service’s Ground Advantage program, which handles parcels up to 70 pounds with longer transit times, is increasingly being used for non-urgent deliveries. The trade-off is slower service and sometimes less precise tracking. PNG Logistics Co. is helping clients evaluate whether the savings justify the changes in customer experience.

For companies willing to experiment, multi-carrier platforms are proving effective. These tools allow businesses to compare rates and transit times in real time, selecting the best carrier for each individual shipment. However, the switch to a multi-carrier strategy is not without complications: carrier integrations, technology upgrades, and staff training are all part of the transition. PNG Logistics Co. is assisting customers in making these operational shifts where justified by the cost analysis.

FedEx and UPS, meanwhile, are restructuring their networks. Terminal closures, automation upgrades, and the consolidation of ground and express operations are all underway. These efforts are designed to cut overhead and improve package handling efficiency. However, they also suggest that the carriers no longer expect to return to the volume levels seen during the height of the pandemic-driven e-commerce boom.

For high-volume shippers, especially those in the B2B space, there are still paths to preferential pricing. Long-term contracts, automation commitments, and defined lane consistency are all areas where carriers may still negotiate. PNG Logistics Co. is leveraging these options for clients with stable, repeatable freight patterns.

For everyone else, the environment has become more challenging. The days of widespread discounts and aggressive rate matching appear to be over. Rate increases are expected to continue through peak season, with surcharges layered on top. Handling fees, oversize penalties, and unauthorized shipment fines are also being used more aggressively. These charges not only increase costs but also complicate budgeting and forecasting.

To provide clarity, PNG Logistics Co. is building a proprietary reporting model that tracks real-world impacts for its clients. Key metrics include cost per package, surcharge exposure, fuel surcharge volatility, and delivery reliability. With this data, businesses can make more informed choices about carriers, packaging strategies, and service levels.

In certain cases, even reducing shipment frequency or adjusting order minimums has made a measurable difference in shipping costs. Consolidating orders into fewer, larger shipments can reduce per-package costs and limit exposure to surcharges. Optimizing packaging dimensions can lower billed weight and avoid unnecessary dimensional weight charges. PNG Logistics Co. is offering clients tactical recommendations tailored to their product mix and delivery needs.

One important consideration is how these changes affect customer experience. Delays, missed scans, or inconsistencies in tracking can have downstream effects on reputation and return rates. PNG is working with clients to strike a balance between cost savings and service reliability—particularly during peak seasons when carrier capacity is tight.

The broader logistics market remains uncertain. Demand is uneven across sectors, international shipping remains volatile, and capacity continues to shift. Carriers are responding by becoming leaner, more selective, and more data-driven. Their goal is clear: serve fewer customers, but serve them more profitably.

PNG Logistics Co. believes this environment demands proactive planning. For businesses that rely on shipping as a core function—especially those with online sales or distributed customer bases—the cost of inaction is rising. Every contract renewal, every rate sheet, and every shipment detail should now be reviewed through a profitability lens.

In summary, the parcel shipping landscape is undergoing a fundamental transformation. FedEx and UPS are moving away from discount-based competition and instead prioritizing efficiency, profitability, and B2B market share. That shift, while rational from a shareholder standpoint, is creating cost and complexity for many businesses.

PNG Logistics Co. is committed to helping clients navigate this new environment through detailed data analysis, strategic planning, and ongoing contract support. As the market continues to evolve, adaptability—and visibility—will be the defining traits of shipping success.