FedEx Announces Price Increases

Effective Jan. 5, 2015

FedEx Announces Price IncreasesFedEx this week revealed plans to increase shipping rates of ground, freight and express services by an average of 4.9%, effective Jan. 5. The announcement comes on the heels of a May decision to charge for box size as well as weight, which will effectively increase prices on some ground shipments. The dimensional weight pricing will also take effect in January.

Despite another announcement by the shipping company this week of strong first-quarter earnings, FedEX is facing increased competition, with the U.S. Postal Service cutting rates for some Priority Mail packages and tech companies like Google, Uber and Amazon experimenting with delivering packages themselves.

In August, regulators approved the Postal Service’s plan to cut postage as much as 58% on certain Priority Mail packages for customers shipping at least 50,000 parcels a year. The Postal Service claimed its prices were too high to be competitive, but rivals FedEx and UPS disagreed. “[The cuts] do not reflect a minor cost-related adjustment in the postage that Grandma will have to pay to send a sweater to young Johnny,” wrote FedEx in its filing with the Postal Regulatory Commission in July. “What USPS is proposing is an aggressive push to gain market share in the fast-growing business of e-commerce.”

The decision is bearing fruit for the Postal Service, with a number of e-commerce companies considering them because of the price change, shipping strategy consultant Rob Martinez told the Wall Street Journal. “A lot of shippers are going to take another look at the Postal Service.”

On Wednesday, FedEx announced strong first-quarter earnings, at $2.10 a share, up 37% from last year. The company attributed the growth to solid volume and revenue increases in its freight shipping division and healthy U.S. domestic volume. “More customers are relying on FedEx because they appreciate the competitive advantages provided by our broad portfolio of solutions,” said Frederick W. Smith, chairman, president and CEO of FedEx Corp.