Facing a soft demand for delivery services, FedEx and UPS are reportedly offering discounts to attract more business to their networks. According to Micheal McDonagh, president of parcel for AFS Logistics, the initial shipping rate proposals from these carriers are more competitive than in previous years, as they aim to capture market share from each other due to limited organic growth.
“There’s a noticeable shift in strategy as carriers focus on acquiring volume from competitors in a market where organic growth is limited,” McDonagh observed in an interview. He highlighted the unusual pricing dynamics currently at play in the industry.
In terms of express parcel rates, which cover faster delivery services, a year-over-year (YoY) decrease is anticipated for the first quarter. Projections indicate a drop to 1.8% above the index’s baseline set in January 2018, a decrease from the 4.1% increase seen in the first quarter of 2023.
Despite these more favorable initial rate offerings for shippers, AFS Logistics advises caution due to the impact of an average annual rate increase of 5.9% announced by the carriers, along with recent hikes in their fuel surcharges.
AFS Logistics detailed in their press release that both FedEx and UPS have implemented adjustments to their fuel surcharges. “In the express category, there was a 1% increase in fuel surcharges by both carriers. For ground shipping, FedEx raised its fuel surcharge by 1%, while UPS increased theirs by 1.25%,” the release stated.
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