No Surprise, FedEx Raises 2019 Rates

November 6, 2018


The sun will come up tomorrow and your Parcel and LTL shipping costs will also rise in 2019. FedEx announced plans to raise rates across all of its divisions effective January 7, 2019.  According to their press release, FedEx US Domestic Ground, Air and International will increase by an average of 4.9%.  This is the 9th consecutive year that FedEx has forecast a 4.9% increase for these same services. FedEx SmartPost rates were not released and based on the USPS requested increases, we anticipate much larger overall cost increases on the widely used residential delivery services. FedEx Freight (LTL) shipping rates are predicted to increase by 20% more than parcel rates with an average increase of 5.9%. Even though the 2019 Rate Guide will not be available for download until December 17, FedEx has provided enough details today for shippers to know their shipping costs will increase significantly with the New Year. As usual the math is mysterious, confusing and very hard to evaluate.  The increases vary by zone and weight across all of the primary FedEx service levels (Ground Commercial, Ground Residential, Priority Overnight, Standard Overnight, 2 Day and Express Saver).  Thus, each customer’s cost increases will vary based on the services they use and their shipping characteristics.  If we use a straight average weighing each weight and zone equally across zones 2 thru 8 we find the following average increases:

  • Ground Commercial – 5.0%
  • Home Delivery – 5.0%
  • Priority Overnight – 6.4%
  • Standard Overnight – 5.7%
  • 2 Day Air – 7.2%
  • Express Saver – 7.3%
In most cases, the Air product increases are higher in the longer zones than in the shorter zones.  The majority of shipper’s Air volumes fall into the longer zones and thus the overall increases for customers are likely higher than the straight average. Our analysis of many widely used surcharges reflect increases of over 5.0% in almost all cases.  The following chart highlights many examples, with a minimum annual increase of 5.0% and several increasing over 10.0%.  The three-year increases paint a painful picture for shippers. Like other small parcel delivery providers, FedEx has seen an increase in e-commerce volumes and in particular, large parcels. To discourage these parcels from entering the small parcel network, FedEx has raised charges such as Additional Handling and Oversize in an attempt to better manage its network. Since 2016, Additional Handling and Oversize charges have increased 28.57% and 33.33% respectively. The Address Correction charge will increase by 6.67% from 2018. This charge has increased over 23.0% since 2016. Thanks to automation, verifying and correcting addresses is no longer a time-consuming task for small parcel providers. However, instead of aligning costs of the charge to costs incurred with this charge, it is now a substantial profit center. Another charge worth noting is the Residential Delivery fee. The rise of e-commerce has resulted in an increase in residential deliveries, often the least profitable delivery location versus that of business locations. The fee is usually applied to locations where a business is operated from a home, or to any shipment for which the shipper has designated the delivery address as a residence. For 2019, the year-over-year increase in the Ground and Air Residential Delivery charge is 6.0% and 5.6% for Home Delivery. According to Spend Management CEO John Haber, “The increases are in line with our expectations and will result in substantial cost increases for shippers.  It is critical for every shipper to understand how these increases will impact their costs in 2019 and work pro-actively to try and minimize these cost increases.  SME has been strategically helping large shippers mitigate these type of cost increases for the last decade.”

Blog Posts

  • Categories

No Surprise, FedEx Raises 2019 Rates

November 6, 2018


The sun will come up tomorrow and your Parcel and LTL shipping costs will also rise in 2019. FedEx announced plans to raise rates across all of its divisions effective January 7, 2019.  According to their press release, FedEx US Domestic Ground, Air and International will increase by an average of 4.9%.  This is the 9th consecutive year that FedEx has forecast a 4.9% increase for these same services. FedEx SmartPost rates were not released and based on the USPS requested increases, we anticipate much larger overall cost increases on the widely used residential delivery services. FedEx Freight (LTL) shipping rates are predicted to increase by 20% more than parcel rates with an average increase of 5.9%. Even though the 2019 Rate Guide will not be available for download until December 17, FedEx has provided enough details today for shippers to know their shipping costs will increase significantly with the New Year. As usual the math is mysterious, confusing and very hard to evaluate.  The increases vary by zone and weight across all of the primary FedEx service levels (Ground Commercial, Ground Residential, Priority Overnight, Standard Overnight, 2 Day and Express Saver).  Thus, each customer’s cost increases will vary based on the services they use and their shipping characteristics.  If we use a straight average weighing each weight and zone equally across zones 2 thru 8 we find the following average increases:

  • Ground Commercial – 5.0%
  • Home Delivery – 5.0%
  • Priority Overnight – 6.4%
  • Standard Overnight – 5.7%
  • 2 Day Air – 7.2%
  • Express Saver – 7.3%
In most cases, the Air product increases are higher in the longer zones than in the shorter zones.  The majority of shipper’s Air volumes fall into the longer zones and thus the overall increases for customers are likely higher than the straight average. Our analysis of many widely used surcharges reflect increases of over 5.0% in almost all cases.  The following chart highlights many examples, with a minimum annual increase of 5.0% and several increasing over 10.0%.  The three-year increases paint a painful picture for shippers. Like other small parcel delivery providers, FedEx has seen an increase in e-commerce volumes and in particular, large parcels. To discourage these parcels from entering the small parcel network, FedEx has raised charges such as Additional Handling and Oversize in an attempt to better manage its network. Since 2016, Additional Handling and Oversize charges have increased 28.57% and 33.33% respectively. The Address Correction charge will increase by 6.67% from 2018. This charge has increased over 23.0% since 2016. Thanks to automation, verifying and correcting addresses is no longer a time-consuming task for small parcel providers. However, instead of aligning costs of the charge to costs incurred with this charge, it is now a substantial profit center. Another charge worth noting is the Residential Delivery fee. The rise of e-commerce has resulted in an increase in residential deliveries, often the least profitable delivery location versus that of business locations. The fee is usually applied to locations where a business is operated from a home, or to any shipment for which the shipper has designated the delivery address as a residence. For 2019, the year-over-year increase in the Ground and Air Residential Delivery charge is 6.0% and 5.6% for Home Delivery. According to Spend Management CEO John Haber, “The increases are in line with our expectations and will result in substantial cost increases for shippers.  It is critical for every shipper to understand how these increases will impact their costs in 2019 and work pro-actively to try and minimize these cost increases.  SME has been strategically helping large shippers mitigate these type of cost increases for the last decade.”

Blog Posts

  • Categories