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FedEx Corp. plans to add a new surcharge for its largest customers, citing higher pandemic-related costs and indicating that robust demand continues to give couriers considerable power to dictate prices.
The extra fee of 30 cents per residential package will kick in Feb. 15 for customers that have weekly average volume of more than 30,000 U.S. packages in January. The levy comes about a month after FedEx announced other surcharges that take effect Jan. 18.
“The impact of the virus continues to generate elevated volumes, and we continue to experience high demand for capacity,” the Memphis, Tenn.-based courier said Jan. 15 on its website. The charge will allow FedEx “to continue providing our customers with the best possible service.”
FedEx and chief rival UPS Inc. have raised prices aggressively after the pandemic caused consumers to order more goods online rather than risk shopping in stores. Profits at both couriers have swelled even as they grappled with new expenses to keep workers safe and to handle an influx of residential deliveries, which are more costly than multipackage business shipments.
The surcharge is “positive for both” FedEx and UPS, Allison Landry, an analyst at Credit Suisse Group AG, wrote in note to clients Jan. 15.
FedEx surged 58% in the 12 months through Jan. 14, and UPS jumped 39% while the S&P 500 advanced 16%.
The new charges may not come as a surprise to large shippers, which endured limits on pickups during the holiday season if they exceeded preset agreements with the couriers.
Surcharges are a “necessary part” of FedEx’s pricing strategy on e-commerce business, Brie Carere, the company’s marketing chief, said on a conference call with analysts in December.
FedEx ranks No. 2 on the Transport Topics Top 100 list of the largest for-hire carriers in North America. It ranks No. 15 on the Transport Topics Top 50 list of the largest logistics companies in North America.
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