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FedEx slaps new fee on big shippers, fueled by e-commerce

Thomas Black
Bloomberg

FedEx Corp. plans to slap a new surcharge on 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 Monday.

“The impact of the virus continues to generate elevated volumes, and we continue to experience high demand for capacity,” the Memphis, Tennessee-based courier said Friday on its website. The charge will allow FedEx “to continue providing our customers with the best possible service.”

A driver with FedEx carries a package away from a van, Tuesday, Dec. 8, 2020, in Seattle.

FedEx and chief rival United Parcel Service 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 Friday.

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FedEx surged 58% in the 12 months through Thursday and UPS jumped 39% while the S&P 500 advanced 16%. FedEx fell 1.2% to $253.28 at 1:03 p.m. Friday in New York.

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 conference call with analysts last month.