United Parcel Service and FedEx have been lowering fees to business customers as they brace for a weak holiday season — partly because of pushback over rates that have surged since the pandemic, according to industry experts.
Big shippers that typically raise their rates during the peak shopping season are seeing signs that consumer demand for shipping will be weaker this year and are trying to keep new competitors at bay, Steve Howard, director of World Parcel Alliance, an international shipping company, told The Post.
“Shipping rates and what customers are willing to pay just don’t match anymore,” Howard told The Post.
In response, rates are plunging across the logistics ecosystem, from the fees that container ships charge to the fees that truck companies charge to pick up goods from shipyards — which is a far cry from the height of the pandemic, when their rates soared.
“Shipping volumes worldwide are down by at least 25% across the board,” Howard said, adding that some freight ships from Asia “are being canceled right now during the busiest time of year.”
Some businesses that have met with UPS and FedEx sales reps say the shippers are “extending discounts and withdrawing penalties on early renegotiation requests,” according to a Wall Street Journal report.
Meanwhile, the US Postal Service will not add a holiday surcharge — which ranged last year from 25 cents to $6.50 a package — the agency said in September.
Last year, carriers delivered an average 90 million parcels a day during the holidays, but that number is expected to drop to 82 million this year, according to ShipMatrix, a firm that analyzes shipping data.
“It’s not going to be a good peak,” ShipMatrix president Satish Jindel told the Journal. “People are spending money on things that we don’t transport.”
Over the past five years, both shippers had implemented caps on the number of parcels they would deliver per customer.
But during the pandemic, when online shopping soared and companies far exceeded their limits, they had to supplement their carriers or find new ones, Howard said.
“There are a lot of companies that have taken a big chunk out of UPS and FedEx even though they are still No. 1 and No. 2.”
“Our sales teams have the latitude to do what’s right for our business and for our customers,” UPS spokesman Glenn Zaccara told the Journal. He said UPS isn’t using discounts to win back volume. “We are pricing according to demand and capacity in the market.”
FedEx, for its part, gained 400,000 parcels a day while UPS’ workers were negotiating a new labor contract this summer.
“My job is to make it very difficult for our primary competitor to win back that share,” Brie Carere, FedEx’s chief customer officer, said during a recent earnings call.
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