FedEx SmartPost to Raise Rates Again

By April 20, 2015 News
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While FedEx SmartPost has not made any public announcements as of this publication, select customers have received written notifications of a price change effective April 27, 2015. Early indications are that FedEx intends to increase SmartPost rates by 8.3%.

This is on the heels of the average 4.9% increases on the FedEx deferred ground product that took effect January 4, 2015. However, it should be noted that lightweight packages 1-10 pounds – which represent 95% of FedEx SmartPost packages – took an increase of 6.2%, which of course is much higher than the “average” (see Chart 1 below).

chart1

The Postal Service filed a rate change with the Postal Regulatory Commission on January 26, 2015. Rate increases for Parcel Select, the Postal Service’s bulk ground shipping product, will increase an average of 7.3% for destination entered parcels. However, lighter weight packages will increase higher than the average (see Chart 2 below). Today, approximately 98% of FedEx SmartPost packages are destination entered.

chart2

However, since the negotiated services agreement (NSA) between the USPS and FedEx SmartPost is not public, none of us have visibility to FedEx SmartPost’s actual spending increase.My strong suspicion is that the contract includes preferential terms, and that FedEx SmartPost receives a lesser rate increase than those shown above in Chart 2 – or potentially delayed implementation of rate increases.

So is another FedEx rate increase of 8.3% in April 2015 – on the heels of a 6.2% increase in January 2015 for SmartPost packages up to 10 pounds – justified?

Well, let’s add the Postal Service’s actual dollar increases pending to current SmartPost pricing (Chart 3 below).

chart3

chart3(2)

8.3% is NOT justified, not by a longshot because the base rates for SmartPost are so much higher than the baseline rates for Parcel Select services for DDU entry. Obviously, applying the same percentage increase to a much higher number (FedEx SmartPost) results in a significantly higher rate increase for shippers than the actual increases incurred by FedEx. Shippers are wise to keep this mind when negotiating SmartPost increases.

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