Friday, December 21, 2012

Christmas at the 'Duopoly'

UPS and FedEx price adjustments go in only one direction.

The small package giants generally “parcel out” Christmas gifts in the form of rate increases this time each year. Both “Brown” and “Purple” generally publish overall increases for ground and air, offset by fuel reductions, which remain in effect if oil prices stay relatively low.

UPS Ground announced a base 5.9 percent increase, with a one percent fuel reduction. FedEx has yet to announce, but typically mirrors the other half of the parcel ‘duopoly’ to the penny.

To really see what the companies are doing, look beyond the base numbers – even at Christmas time, the devil is in the details. Perhaps taking advantage of uneducated customers, FedEx announced a 9.2 percent increase in Express Saver zones 2-4, which means the shipment is traveling less than 600 miles from the point of origin. This will affect only those not aware of their ground service’s growing coverage.

With UPS, as well, the three-day users are feeling the pain the most, but with Brown, the educated shipper takes the biggest hit; increases are highest in zones 6-8, where three-day service is the most appropriate alternative to ground.

UPS Ground minimum charges, for example, have added up to a cumulative 61.3 percent increase over the last eight years. The continuing increases at the small end of the package spectrum are pushing cost-sensitive B2C shippers to SmartPost, SurePost, and straight USPS options.

Throw in accessorials and incidental fees, and it’s easy to see who’s getting the bulk of the gifts this season. Merry Christmas!

Kirk Shearer


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