FedEx will increase its rates once again in the coming year of 2023. This is a hot topic among businesses, as many wonder how the rate increase will affect them.
It’s important to remember that this is nothing new. FedEx has been raising rates little by little for the past few years, so this latest increase shouldn’t be too much of a shock.
This blog post will explain everything you need to know about the upcoming FedEx rate increase and how businesses handled the increases in 2022.
2022 FedEx Rate Increase Analysis
On January 4, 2022, FedEx announced that it would raise its shipping rates for FedEx Express (Domestic, U.S. Export, and U.S. Import), FedEx Ground, and FedEx Home Delivery by an average of 5.9%.
This is the first time in over six years that the rate increase was greater than 4.9%. The company said the rate hike was due to “the significant increases in transportation costs, including vehicle fuel and maintenance expenses.”
The percentage of increase depended on the weight of the package and where it was going. Customers began seeing a bigger shipping bill as early as February 2022.
FedEx 2022 surcharges exceeded the announced 5.9% for more high-frequency items.
However, FedEx introduced a new pricing structure for certain shipments, letting customers save up to 20%.
What Is a General Rate Increase (GRI)?
General Rate Increase (GRI) refers to a percentage increase in the rates charged by a shipping carrier.
The Impact of FedEx GRI on Shippers
When it comes to shipping, there are a few things to keep in mind.
First, you must have a strong relationship and level of communication with your carrier. Second, you need to know your shipping profile inside and out to see how the rate increase will affect your bottom line. And last but not least, having the right technology tools is key to finding the most efficient and cost-effective shipping option.
Other than carriers increasing their shipping rates, learn more about other common logistical issues.
2023 FedEx Rate Increases: What We Can Expect
FedEx will raise Ground, Home Delivery, and Express shipping rates by an average of 6.9% in 2023. Freight rates will also increase by an average of 6.9% to 7.9%.
FedEx blames the weak global economy for raising prices, as demand for package deliveries worldwide went down. This comes after the company’s shares plunged 21% in late September of 2022 after warning that it would fall $500 million short of its revenue target.
So if you use FedEx for your shipping needs, be prepared to pay a little bit more starting next year.
Adding to shippers’ problems, it is “extremely likely” that UPS will increase its rates by 6.9%, just like FedEx did. If UPS charges lower rates than FedEx, a lot of FedEx’s customers might switch to UPS, crowding their network.Caleb Nelson, Chief Growth Officer at Sifted
Want to learn more about different shipping services? Start with same-day and next-day delivery.
1. Additional Surcharges
There will be changes to shipping surcharges and fees that could affect your total shipping rate.
For a detailed chart on additional FedEx surcharges and fees, click here.
2. Delivery Area Surcharges
A new Delivery Area Surcharge of $13.25 per package will be applied to domestic shipments within the contiguous U.S., starting January 30, 2023, for select ZIP codes considered as remote.
3. FedEx Express, Home Delivery, and Ground Rates
For businesses that rely on FedEx Express for shipping, it’s time to start budgeting.
The delivery minimum net charge will increase by 4.45% next year, from $65.14 to $68.04. That might not seem like much, but the cost can add up quickly for customers who ship multiple packages daily.
Similarly, the FedEx Ground and Home Delivery minimum net charge will also increase. The 2023 FedEx rate for the minimum net charge will go from $9.36 to $10.10. This is an increase of 7.91%. In contrast, the 2021 increase was just 6.44%, and the 2022 increase was 6.85%.
FedEx Home Delivery offers the same rates as FedEx Ground packages, with an additional $5.15 residential surcharge. This extra charge is for the final delivery to a residence. Home Delivery packages are billed as if they were Ground packages, so the surcharge is applied to the total rate. The total rate for a Home Delivery package would be calculated by adding the base rate and the residential surcharge.
For example, if the base rate for a Ground package is $10.00, the total rate for a Home Delivery package would be $15.15 ($10.00 + $5.15).
4. Other 2023 FedEx Rate Increase Changes
- FedEx will increase the late payment fee to 8% for invoices that are paid late.
- Oversized packages will incur an additional charge of $135 – $200.
If you run a medical business, it would be best to check out the latest medical courier service rates!
How Businesses Will Respond to FedEx Rate Increases
It’s no secret that shipping costs have been on the rise in recent years.
With big names like FedEx increasing their rates, businesses that rely on last-mile delivery services will feel the pinch. This is especially true for healthcare, industrial, and retail companies, where shipments are often time-sensitive and expensive.
Some businesses have absorbed the higher shipping costs, while others were forced to pass those costs on to their customers. In some cases, sales decreased, and customer complaints became more common.
Healthcare companies rely on timely medical supplies and equipment deliveries, so any delays due to higher shipping rates will affect patient care. Retailers are also concerned that the higher costs will eat into their profits, especially during the holiday shopping season. And industrial companies worry that the higher rates will make shipping raw materials and finished products more expensive.
How should businesses deal with general rate increases?
“Knowing your costs is the best way to deal with general rate increases. Analyze your shipping invoices in detail, and make sure you understand every line item. What is the price now, and what will it be in January? Some surcharges will go up by double digits, while others will only increase slightly.
After that, look for the best provider of local services in your area. Sometimes it’s cheaper and offers a higher quality level of service to use an alternative provider like Dropoff. For example, Dropoff provides customized service with excellent customer care 24/7, led by our teams of specialists and cutting-edge technology.”Millie Tarallo, Chief Revenue Officer at Dropoff
Check out our top picks of the best last-mile delivery companies.
How Dropoff Can Help
If you’re currently partnered with FedEx, you might be having second thoughts considering the upcoming rate increase. Or maybe you’re considering partnering with a third-party logistics provider for the first time.
At Dropoff, we become an extension of your company. We address and tackle all your logistical pain points so you can focus on what you do best: running your business. Our platform allows you to easily schedule and customize pick-up from anywhere with to-the-minute ETAs.
Our logistics experts are available 24/7 to answer any questions or help with any issues that may arise.
Talk with a Dropoff expert, and let us build a custom logistics solution for your business.
FAQs for FedEx’s 2023 Rate Increase
GRI stands for General Rate Increase, which refers to a percentage increase in the rates charged by a shipping carrier.
FedEx is one of the largest delivery companies in the world, and every year they experience a surge in demand during the holidays. This increase in demand puts a strain on their resources, so FedEx raises rates.
These surcharges and fees will help them offset the increased operating costs that they experience during this time.
All changes to FedEx rates, surcharges, and fees will take effect on Monday, January 2, 2023.