FedEx Corp. released their third quarter earnings this week, with a reported revenue of $6.56 billion, down 1% from last year’s $6.66 billion. More specifically, FedEx Ground reported revenue of $4.41 billion, up 30% from last year’s $3.39 billion. At a quick glance, one may assume all is well enough at FedEx. Yet their CEO – Fred Smith – begs to differ when it comes to the increase in revenue generated from FedEx Ground.
“There’s an enormous interest in people having things delivered to themselves. It does not change, one iota, the input costs of the delivery,” chief executive officer Fred Smith said. Expanding on this was their CFO Alan Graf, Jr., who stated that “we can’t build these networks and spend this kind of capital and not get a return on it,” in response to the increase in ground deliveries and consumer expectations. Keeping this in mind, is FedEx preparing their customers for a raise in rates soon? Brian Gibbs, President of Refund Retriever, believes yes based on FedEx’s history of raising rates across the board.
“Each year FedEx increases various charges. Ground minimum charges, for example, for a package are now $6.94, while ten years ago this was only $3.80,” shares Gibbs. Expanding on this, Gibbs explains that he believes the possibility of FedEx increasing their rates – specifically when it comes to eCommerce shipments and retailers in general – has likely been something FedEx has been “kicking around for awhile.”
Refund Retriever – whose primary focus is parcel audit recovery and parcel management – knows a thing or two about shipping expenses. With over 3,000 active accounts, Refund Retriever spends their days analyzing parcel expenses and ultimately identifying incorrect charges that lead to refunds for their clients. With the majority of their accounts being retailers – both online and physical storefronts – Gibbs believes that if FedEx should decide to increase their ground shipping charges, UPS will likely follow. But what does this mean for retailers?
Any increase in ground delivery costs will be directly forwarded to the consumer as soon as they choose the desired shipping option upon checkout. If there is a cheaper option, say USPS or another competitor with lower shipping, they will instinctively take that option, of course. But the more important issue here is that consumers will begin to exclusively choose the larger eCommerce retailers that offer free or flat rate shipping as rates increase… something smaller retailers typically are not able to offer,” explains Gibbs.