FedEx Uses Dynamic Pricing to Draw More from Peak Season Surcharges
last-mile delivery delivery surcharges Ecommerce peak season All Blogs
Apr 04, 2023
Share this article
If you’re a FedEx customer, you might have been surprised when you saw your peak season delivery bills, especially if you had strong sales through the holiday. FedEx introduced the concept of dynamic pricing with peak season surcharges—the higher your volume, the higher the peak season surcharge rate per package.
Here’s how it works: FedEx sets weekly volume expectations for peak season based on average volumes earlier in the year. Then each week during peak season, they compare a customer’s volume for the week to their non-peak volume and adjust peak surcharges accordingly. As holiday business picks up from October onwards, surcharge rates will shift based on demand. For shippers, you don’t know how much you’re paying for shipping until you see the bill.
We understand why they do it. With a large fixed asset base and hundreds of thousands of full-time employees, peak season means significantly higher warehouse and driver overtime costs and vehicle maintenance costs. At a time when FedEx is also seeing increased competition for ecommerce customers and an overall decrease in package volume, the bean counters have found a creative way to squeeze a few extra dollars in revenue out of existing customers. In their most recent quarter ending February 28, 2023, FedEx saw an 11% year-over-year decrease in Ground Shipping package volume but an 11% increase in revenue per package. These numbers are good for FedEx but not so good for you.
Supply Chain Drive has more details on FedEx’s dynamic surcharge pricing and its business strategy. We think there’s a better way. We can provide expedited next-day urban last-mile delivery at a price comparable to national carrier ground rates with no peak season surcharges, dynamic or otherwise. The rate you negotiate is the rate you pay. As you begin to plan for peak season in the fall, let AxleHire show you how we can provide a more predictable cost basis for your peak season volume while at the same time boosting service levels for your customers.