FedEx and UPS have announced their most aggressive fee increases in recent years, leaving package shippers scrambling to understand the full impact on their bottom line.
What’s worse – the upcoming changes reach far beyond the 5.9% general rate increase that has been shared around town. In fact, shippers now face a perfect storm of new dimensional weight calculations, increased handling surcharges, and even a fresh 2% credit card payment fee. Yikes.
These changes mainly target businesses shipping bulk items, and some zones are even seeing large package surcharges climb by up to 20%. So, whether you’re shipping furniture, sporting goods, paintings, or oversized electronics, 2025 is shaping up to be a year that will demand strategic adaptation.
Both FedEx and UPS are rolling out significant pricing changes that will reshape shipping costs in 2025. While both carriers announced a 5.9% average rate increase (twins!), the actual impact on package shippers will vary considerably based on specific shipping characteristics.
The widely publicized rate hike masks a more complex reality for shippers.
For FedEx, ground and air deliveries in zones 2-4 will experience an average rise of 5.91%.
So, what’s the big hullabaloo?
Well, zones 2-4 might not be affected very much … but zones 5-8 will face a steeper hike of 6.39%.
Here are some key factors that are affecting individual rate increases:
Okay, so what kind of timeline are we talking about for the implementation of these new rates?
UPS will implement its new rates on December 23, 2024, as an early Christmas present to shippers, while FedEx will be implementing its new rates on January 6. This timing means that UPS will capture some additional revenue during the tail end of the peak shipping season.
Those shipping packages should note that UPS has already begun some changes, including a new 2% credit card surcharge that took effect on October 21, 2024.
The 2025 rate increase marks a notable shift from recent years. After holding steady at 4.9% for several years, rates jumped to 6.9% in 2023 during peak pandemic demand (and there has been no looking back).
For most package shippers, the real cost increase will exceed the announced 5.9% increase. In fact, UPS customers shipping the same items as last year will face an average increase of 6.3%, while FedEx customers can expect around 7.0% higher costs. Some shippers, depending on their shipping profiles, might even see increases reaching 12-16%.
Businesses shipping bulky items face the steepest cost increases in years, with handling-related surcharges rising more than four times the general rate increase. These changes will mainly affect furniture, home goods, and sports equipment retailers.
UPS is introducing revised calculations for large package surcharges based on length, weight, and cubic volume starting January 27, 2025. This change marks a significant shift from the current system. The new approach means some packages that previously avoided surcharges may now qualify for additional fees (because, like, why not).
The impact on handling fees is substantial, with increases averaging over 25%. UPS has implemented a new 40-pound minimum billable weight requirement for packages needing additional handling due to their dimensions. This change mainly affects businesses shipping large but lightweight items, like:
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Zone-based pricing shows dramatic variations in large package surcharges for 2025. Here’s a breakdown:
Both FedEx and UPS have doubled their delivery surcharges for oversized packages over the past five years. And it should be no surprise that some businesses are now considering alternative shipping methods. Package shippers can take proactive steps by evaluating their packaging dimensions and exploring optimization opportunities like rate shopping to find the cheapest shipping option.
Major carriers are changing how they calculate shipping costs, with new minimum weight requirements taking center stage for 2025. These changes signal a shift in how package dimensions and weight are used to determine final shipping costs. Times are a changin’ …
UPS has introduced a new 40-pound minimum billable weight requirement for packages requiring additional handling due to the package’s dimensions. This change represents a dramatic shift from previous policies, where the actual weight was taken into consideration when it came to pricing.
FedEx hasn’t announced a matching policy (surprise, surprise), suggesting they might be testing the market’s response to UPS’s move (ah, yes – the good ol’ wait-and-see method.)
The new requirement will affect businesses shipping products that occupy significant space but weigh less than 40 pounds. The most impacted items include:
For these, shipping costs will be calculated as if they weigh 40 pounds, even when their actual weight is significantly less. Therefore driving up shipping costs substantially for businesses that deal mostly with lightweight (but bulky) merchandise.
UPS’s implementation of a 2% surcharge on credit card payments for invoices has added another layer to the complexity of shipping costs. This change marks a significant shift in how shippers manage their payment strategies.
Starting October 26, 2024, UPS implemented a 2% surcharge on all credit card payments. This fee applies to the total shipping amount and includes base rates and additional surcharges.
The timing of this implementation and having it happen ahead of the general rate increase is a strategic move on UPS’s part to capture additional revenue during the busy holiday shipping season.
The credit card surcharge won’t apply uniformly across all locations. Several regions have secured exceptions from this new fee (which is good for them). These include:
Shippers operating in these locations are in luck. They can continue to process credit card payments without the additional 2% fee, creating a geographical advantage for businesses based in these regions.
As a business headquartered in Phoenix, I would like to add: Come on, Arizona, let’s get on that list too!
To avoid the new credit card surcharge, shippers have several payment options to choose from. UPS accepts various payment methods, including:
For businesses managing regular shipping volumes, automated billing using electronic funds transfer might offer the most cost-effective solution. Some shippers are also exploring third-party billing arrangements. This is when a separate entity handles the payment processing.
The implementation of this credit card fee reflects a larger industry trend where businesses pass along processing fees to customers. Therefore, shippers should carefully evaluate their payment processes and consider transitioning to alternative payment methods.
Smart strategies can help offset the impact of these new rates while maintaining efficient operations.
Right-sizing packages have become paramount as dimensional weight pricing continues to evolve. In fact, package shippers that use corrugated boxes can see immediate savings by reducing excess space, as a standard 12x12x12 box automatically incurs a 13-pound dimensional weight charge under the current 139 DIM divisor.
Some optimization techniques you can use to help with this include:
Shippers can have significant leverage when it comes to carrier negotiations despite rising rates. FedEx and UPS’s duopoly isn’t as formidable as it once was. Now, there are other alternatives (like regional carriers). Luckily, this competition creates opportunities for rate negotiations.
Some effective negotiation strategies you can use include:
A carrier rate shopping feature, like the one Zenventory provides, auto-selects the best shipping service for each and every one of your packages (from 1 to 1,001 – and so on). Therefore, by using a rate shopping tool, you can automatically optimize every shipment for the lowest cost to get the package to its destination on time. Even better? With a rate shop tool, you can compare shipping rates with a click of a button. Beats manually looking up each and every carrier, right?
Combat rising shipping costs with Zenventory. Also, with Zenventory, you can be up and running in days, not weeks or even months.
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