UPS and FedEx announce identical rate rises in the US market. Again.

FedEx and UPS historical rate increases

FedEx has just announced its rate increase for US parcels customers for 2019, and once again, it and UPS are introducing identical rate rises for their core ground services, at 4.9%

Over the last decade or so, the two leading networks have tended to mirror each other’s increases. Given that the increases are somewhat ahead of inflation – currently running at 2.3% in the US – some observers, who have interpreted this as evidence of duopolistic behaviour on the part of the leading two carriers, also believe that successive increases have created the space for competitors and new entrants – such as Amazon’s third party parcel service.

Historically, UPS in particular would never offer discounts from its rate card, even for the largest shipper. However, volume discounting is now common in the US, as in other markets. This means that the rate increases are more of an issue for smaller shippers than the largest, who can negotiate discounts.

It is widely believed that the view that it was overpaying UPS and FedEx for deliveries was an important factor in persuading Amazon to carry out its own deliveries.

Since 2014, both carriers have made smaller increases than previously

The increases are below those announced by postal operator, USPS last month, of 9-12%. USPS has come under increasing pressure from President Trump and other parties to increase the rates it charges to large volume customers such as Amazon for final delivery of parcels

These, and other issues, are explored in our recent report on the US Parcels Market: US Parcels Market: Market Insight Report 2018