FedEx has announced its General Rate Increase (GRI) for 2021. As in almost every year, the average increase is 4.9%, although the increase is not uniform across all service types and parcel sizes.
This article will unpack the latest rate increase, its various nuances, and what it might mean for your business in particular.
According to FedEx “These rate changes enable FedEx to continue investing in service enhancement, fleet maintenance, technology innovations, and other areas to serve customers more effectively and efficiently.” But this rate increase can hurt your business big time, particularly in a COVID-19 pandemic-influenced situation.
Make sure to read till the end for ways to save on shipping in 2021 and reduce the impact of FedEx’s General Rate Increase on your business.
But before that, here are the most notable aspects of the latest rate increase by FedEx.
Key Highlights of the General Rate Increase for 2021
- The average rate increase is 4.9% for Express, Home, & Ground deliveries from January 4, 2021.
- The carrier has added a new late fee of 6% for unpaid invoices beyond 15 days (or agreed-upon terms) for Express & Ground customers.
- The Ground minimum rate for shipments has been increased from $8.23 to $8.76 per parcel.
- Beginning January 18, 2021, the additional handling surcharge will be $16 (up from $15).
- Delivery Area Surcharges (DAS) will increase by 15–50 cents a package for deliveries both commercial & residential.
- The Oversize charge for Ground Home deliveries will increase from $120 to $130.
- Beginning February 1, 2021, there will be changes to fuel surcharges for Express Freight shipments.
- An international out-of-delivery-area surcharge or an international out-of-pickup-area surcharge for customers in remote areas using international Express Freight services will be added. Here is a list of ZIP codes for the latter services.
What the Increase in Rates Means for Your Business
Needless to say, this rate increase will have a definite impact on the shipping spend of eCommerce businesses like yours.
This increased expenditure will be a double-whammy for businesses that are already reeling under FedEx’s recent rate increases on account of Coronavirus-related service disruptions and the rate increases on FedEx One services (effective from November 1, 2020).
While the average rate increase is touted to be 4.9%, it is not uniform across all services or weight categories.
The rate for packages in the 1–5 lb. range — the overwhelming majority of eCommerce deliveries — will increase by an average of 6.6%, while those weighing 6–10 lbs. will increase by 5%. Parcels in the 11–20 lb. and 21–30 lb. ranges will see more modest increases that are nearer the GRI norm: 4.8% and 4.7%, respectively.
Be ready for reduced margins on account of shipping costs, particularly if most of your shipping is done in the 1–5 lb. range.
If your shipping carrier does not keep to its SLAs in terms of timelines or service quality, that’s another way in which you will be losing out by paying for poor service.
However, you can still tide over the situation by taking the right measures.
How Your Business Can Cope With the FedEx Rate Increase
Here’s what you can do to tide over FedEx’s rate increase:
1. First Understand Your Shipping Profile
The first & foremost thing from the shipping point-of-view is to understand your shipping profile. You need to have the following pieces of information at your fingertips;
- Your monthly shipping volume
- Your average shipping spend per month
- The carriers you ship with
- The service types you typically use
- The base rate for your parcels
- The average delay rate for your parcels
It is only once you are armed with these basic pieces of information will you be able to make shipping choices that help you optimize your shipping-related expenditure.
2. Renegotiate Your Contract With Your Shipping Carrier (Speak to Your FedEx Representative)
Once you have all the necessary information at your disposal, you can renegotiate your shipping contract with FedEx. You can highlight how some aspects of your contract are not viable for your business. The base rate is a case in point. In the latest price hike, the base rate has been increased from $ 8.23 to $ 8.76.
The base rate is the bare minimum you will have to pay for a parcel you ship, any negotiated discount notwithstanding. Try to reduce your base rate per parcel with FedEx rather than merely aiming to get a percentage discount on your parcels.
Additionally, since FedEx has introduced a new late fee of 6%, consider negotiating that as well, both from a percentage as well as a timeline point of view.
A pro tip is to negotiate with multiple carriers simultaneously and inform the other representative of a possibly better deal you’re getting from a competing carrier. This way, you could end up with an even sweeter deal!
3. Stand Firm Against a Waiver of Shipping Refunds
Shipping carriers like FedEx are often all-too-eager to have retailers sign a waiver of shipping refunds. In return for a waiver of refunds, your FedEx representative may offer you a discount on your shipping rates. However, you should always avoid signing a waiver of shipping refunds because:
- Shipping refunds in the event of service failures are your right.
- Signing a waiver means you pay for poor service.
- Shipping refunds help save more on shipping spend than a mere 2–5% discount.
4. Consider Using Multiple Shipping Carriers for Your Logistics Needs
It always helps to have options. This is particularly true when it comes to shipping. Depending on just one shipping carrier means you are at their mercy, even at the cost of non-fulfillment of SLAs.
On the other hand, using more than one carrier allows you to make use of multiple service types and economize on costs. Of course, in order to do this, you will first need to be armed with information about these carriers.
5. Use a Service to Audit Your Invoices & Automatically Claim Refunds
If you haven’t been regularly auditing your monthly shipping invoices, you’ve been missing out. Shipping carriers like FedEx are prone to 50+ service failures apart from late deliveries.
By auditing your shipping invoices and claiming refunds, you can save up to 20% on your shipping spend.
If you ship at scale, it is advisable to use a service that performs human-backed automated audits on your shipping invoices, claims refunds where applicable, and submits the claimed amount into your account.
This automated independent third-party approach allows you to
- Save on labor & audit costs
- Navigate FedEx’s complex refunds process
- Audit for & claim refunds at scale
- Over time, coax your carrier to perform better
A third-party solution that can make a real difference to your business by helping you save up to 20% on shipping costs with FedEx is LateShipment.com.
How LateShipment.com can Help Your eCommerce Business
LateShipment.com is the world’s only logistics cloud tool that helps businesses of every size reduce shipping costs by up to 20% and provide memorable delivery experiences to customers at scale.
At LateShipment.com, our focus has remained steadfastly on the last mile, typically the part of the logistics chain that is the most opaque.
LateShipment.com allows you to have your monthly shipping invoices automatically audited for 50+ shipping carrier service failures and claims refunds on your behalf. The claimed amount is directly deposited into your account. This can save you up to 20% on your overall shipping spend.
Our automated shipping refunds solution:
- Audits your monthly shipping invoices
- Submits refund claims to your carrier(s) on your behalf
- Deposits the refunded amount directly into your account
That’s not all!
LateShipment.com’s Delivery Experience Management platform helps you craft outstanding post-purchase experiences and build long-lasting customer relationships.
Our groundbreaking post-purchase solutions help businesses effortlessly bridge the post-purchase CX gap and discover new ways to delight and retain customers.
Our high-impact post-purchase offerings allow you to:
- Stay on top of order deliveries, particularly those facing delays
Track in-transit shipments in real-time across multiple carriers on a single dashboard.
Receive predictive alerts about parcels facing delivery delays & take remedial action.
- Over-communicate and reduce customer anxiety post-purchase
Proactively identify and communicate with customers facing delivery issues.
Automate order status notifications via eMail or SMS throughout the delivery lifecycle.
- Reinforce your brand identity with custom order-tracking assets
Provide brand-consistent order tracking pages to customers & drive repeat purchases.
Embed self-serve order tracking widgets on your website and order-related emails.
- Leverage order tracking moments to increase sales and reduce returns
Increase sales with personalized product recommendations on your tracking page.
Reduce returns by providing relevant product usage information on tracking assets.
- Know if customers were satisfied or not with their delivery experience
Capture customers’ Delivery Satisfaction (DSAT) rating after every order delivery.
Measure the average DSAT (Delivery Satisfaction) score of every customer to optimize shipping & delivery processes.
- Access data-rich reports
Gain critical insights about your shipping spend and carriers’ delivery performance across service types and geographies to take data-driven decisions and make shipping efficient.
How good is that?
The best part is, it takes less than 2 minutes to see LateShipment.com in action without any change to your existing workflow.
The value we add to businesses is most evident when experienced first-hand. Try LateShipment.com now.