Countering UPS, FedEx Won’t Raise Holiday Home Delivery Rates

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In a competitive move against rival shipping giant UPS, FedEx Corp. said it will not apply residential holiday season surcharges, except in the case of packages that require additional handling, are oversized or unauthorized.

FedEx said the volume of oversized packages moving through the FedEx Ground network during the holiday season has increased about 240 percent over the past 10 years and is now about 10 percent of all volume handled by FedEx Ground. FedEx has engineered its networks to add sortation and delivery capabilities to accommodate the continued rise in demand for larger, heavier packages, including entire facilities temporarily dedicated to oversized packages.

For those packages that do require additional handling, the holiday season surcharge will be effective Nov. 20 through Dec. 24. FedEx Express and FedEx Ground in the U.S. and Canada will increase the surcharge during this period for additional handling by $3 per package, for oversize goods by $25 per package and for unauthorized shipments by $300 per package.

Patrick Fitzgerald, senior vice president of integrated marketing and communications at FedEx, said, “These packages consume an inordinate amount of cubic space in FedEx Ground and FedEx Express equipment in the U.S. and Canada. Another important solution to this issue is for Congress to adopt a nationwide standard of twin trailers at 33 feet versus 28 feet. This would increase package capacity per trip, increase safety on the highways and use less fuel. Thirty-three-foot twin trailers are currently permitted in only 20 states, and FedEx advocates for a nationwide standard of twin trailers at 33 feet, but no increase in total weight.”

In June, UPS said it would charge extra for most packages delivered to homes from around Black Friday to Christmas. While the per-package fee ranges from 27 cents to 97 cents, analysts estimate that UPS could generate tens of millions in revenue from the fees.

[Read more about UPS holiday rates: UPS Sets New (Higher) Peak Rates for Holiday Season]

When UPS announced the holiday pricing policy, Alan Gershenhorn, chief commercial officer, said, “We’re focused on helping our customers achieve success during some of their most important selling seasons. To meet their requirements, UPS flexes its delivery network to process near double our already massive regular daily volume, and that creates exceptional demands.”

To meet peak volume demand, among many other investments, UPS said it acquires additional air and truck cargo capacity, temporary facilities, and additional sorting and delivery personnel on a temporary basis and often at shorter-term premium rates. Shipments that are larger, heavier or have unconventional shapes or sizes create even greater operational complexity during high-demand periods.

UPS had no comment on the FedEx decision.

Both FedEx and UPS are spending heavily to adapt their networks to handle the uptick in e-commerce orders they are seeing. Research firm eMarketer Inc. predicts that online sales will increase 17 percent this holiday season to $107 billion, far outpacing the expected 3.1% growth in overall retail sales during the same period.


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