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Fedex increasing shipping rates

Posted by Michael Bloch in ecommerce (Sunday October 3, 2010 )

Bad news for online merchants using Fedex for shipping, but with a little bit of a silver lining.

Fedex announced a few days ago it would be increasing Express shipping rates for both domestic and international services by a net average rate of 3.9%. The gross average rate increase will be 5.9%.

The good news for merchants considering free/discounted shipping for the holiday season is that the increases won’t take effect until January 1, 2011.

However, FedEx Freight and National LTL rates will also jump by 6.9%; effective from Nov. 1, 2010.

The company says rate changes for FedEx Ground and FedEx SmartPost will be announced soon, but given the press release mentions “pricing changes for calendar 2011”, it looks like online retailers will dodge a bullet there in relation to the holiday shopping season.

Fedex says the price hike is to allow for investments enabling the company to continue to provide quality service and shipping solutions.

While the increases don’t sound like much percentage-wise, it’s certainly going to take a chunk out of bottom line profits for high-volume shipping merchants who offer free shipping and work on razor-thin margins. However, competitor A will be wearing the same sort of increases as competitor b, so I guess it all pans out. It will be interesting to see how merchants adjust to it; likely it will be a case of increasing the purchase threshold for shoppers to qualify for free shipping.

Fedex has grown into a huge company – With annual revenues of $36 billion, Fedex now has 280,000 employees and contractors around the world. It’s the world’s largest express transportation company, offering delivery services in over 220 countries and territories.

I wonder how much ecommerce has contributed to its growth.


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