FedEx flexes price power with surcharges extending past January

FedEx Corp. is indefinitely extending some surcharges amid soaring package volume and rising delivery costs, pushing its pricing power further into 2021.

While the added fees will be lower than during the year-end holiday rush, the extension breaks with the typical practice in which the extra charges would lapse after the so-called peak season. FedEx and United Parcel Service Inc. have been handling record volume as the coronavirus pandemic spurs a surge in demand for home delivery of goods ordered online.

“We are experiencing extremely high demand for capacity and increased operating costs across our network this holiday peak season,” FedEx said on its website as it unveiled pricing that will take effect Jan. 18. “We anticipate volume to continue to surge into the new year.​”

FedEx’s decision to extend surcharges beyond mid-January heralds increased pressure on retailers and other shippers, with demand for package deliveries expected to remain robust. UPS is likely to follow FedEx and extend its own special fees, said John Haber, founder of Spend Management Experts, an Atlanta-based consultancy that seeks to save money on shipping for clients.

“We don’t think some of these surcharges are going to be ending any time soon, so you need to be very conservative on budgeting,” Haber said. “The first quarter is still going to be a challenge on the capacity side.”

From Jan. 18 “until further notice,” FedEx will charge an extra $30 for oversize items, $3 a parcel for items requiring additional handling and 75 cents for each SmartPost package, according to prices posted on the company’s website.

Earlier this year, the courier announced surcharges for the holiday season that would run mostly through Jan. 17 to manage the onslaught of demand and to cover extra costs for hiring more workers and acquiring more vehicles.

Demand has been so heavy that at one point during the current peak season, the couriers temporarily stopped taking some packages from large retailers when shipments went beyond pre-agreed allotments. FedEx and UPS have also sought to steer volume to weekends where there’s more capacity.

FedEx will report earnings tomorrow, and analysts forecast that profit will jump 60% from a year earlier to $4.01 a share.