We have all heard of the inflationary item in the news and shipping costs are certainly one of those areas being affected by inflation.
On January 2, 2023, FedEx announced its General Rate Increase for the coming year. Unfortunately, this rate hike will be the largest GRI in the company’s history.
As inflation has caused supply chain costs to soar worldwide, this rate increase is just another increase in overhead for e-commerce businesses
Let’s break down FedEx’s big announcement so you know what to expect in the coming year.
Increases for FedEx Ground, Express, and Freight as of January 2, 2023
- FedEx Express, Ground, and Freight rates will increase by an average of 6.9% in 2023.
- Home Delivery surcharges will increase by 8% and delivery area surcharges for home delivery will rise by 10%+
- Late payment fees are increasing to 8%
This record-breaking GRI increase has the potential to disrupt operating budgets in 2023 by and large.
It will be crucial for retailers to select their shipping platforms carefully and pay close attention to their logistics plans.
FedEx doesn’t stand alone when it comes to an uptick in shipping charges, though. Historically, the shipping giants FedEx and UPS have mirrored each other’s rate. This price hike in 2023 is no exception. UPS has also increased its GRI by 6.9%, right in line with its competitor, FedEx.
How the GRI increase plays out across different delivery methods
The amount of the GRI increase will vary based on package size, delivery speed, and zone length.
For items that are shipping FedEx Ground, packages moving a shorter distance will not incur the full 6.9% increase, whereas packages traveling a longer distance will.
Package zones will have the biggest impact (as opposed to weight) when it comes to determining the increased shipping costs.
Ground minimum charges have also increased. It’s important to note that unauthorized packages (those that are larger and harder to move) will see a $125 price surcharge (now $1,150).
FedEx is also implementing a Remote Delivery Surcharge and 4,000 zip codes are subject to an extra fee of $13.25.
In 2022 the FedEx Ground and FedEx Economy minimums were both $9.36. In 2023, following the increase, they are now $10.10. That’s a rate increase of 7.91% for both delivery classes.
FedEx Overnight shipping experienced a smaller uptick, only 4.45% higher than last year. The First Overnight minimum is now $68.04 up from $65.14.
FedEx Priority Overnight and FedEx Standard Overnight both went up 8.49%, while FedEx 2 Day AM, FedEx 2Day, and FedEx Express Saver all went up nearly 8% as well.
FedEx General Rate Increase 2022 vs. 2023
FedEx’s GRI is expected to increase every year. This is on par with the shipping industry as a whole. Let’s take a look at the FedEx rate adjustments between 2022 and 2023.
FedEx prefers shipments that are lighter, smaller, travel a shorter distance, and are shipped to a commercial address. Residential shipments take more time, require more stops, and reduce efficiency.
Packages with a longer transit time decrease the efficiency of drivers and will experience a higher impact from the General Rate Increase (GRI) as their surcharges are more expensive.
This year’s General Rate Increase (GRI) is consistent with the one from last year, but the way it’s being applied has changed. Domestic Express Services, especially those with heavier weight, are facing the largest increases, whereas in the past, lower weight shipments would see the biggest hikes. Now, it’s the heavier packages that will incur the highest increases.
Additionally, carriers are recognizing the challenge and increasing frequency of shipping abnormal-sized packages and FedEx will add an extra $135-$200 to oversize package shipments.
The Reasons for the Increases
According to FedEx the 6.9% general rate increase for 2023 is in direct response to inflation.
Additionally, FedEx experienced lower package volume during the last fiscal year. As a result, FedEx will be merging its package sorting operations, canceling FedEx Ground facility projects and attempting to reduce other expenses. They are making great strides to lower overall costs by $2.7 billion during the current fiscal year.
In an effort to understand the full impact of these shipping carrier rate increases, you need to continually monitor your shipping costs closely. Taking a deep dive into your line items will help you better understand how much you’re spending and where your wins and losses occur.
Using a 3PL can help you reduce shipping costs due to to industry expertise, fulfillment center location, shipping discounts, carrier rate shopping, and shipping carrier options.
We’re happy to provide you with guidance and options for your shipping requirements.