Dive Brief:

• FedEx published three surcharges Wednesday, including a 75-cent SmartPost surcharge. The surcharges begin Jan. 18 and stay in effect until further notice.
• The 75-cent surcharge on SmartPost package services is lower than the $1-$2 surcharge put in place for the holiday season, but higher than the 40-cent surcharge from June.
• The carrier also announced surcharges of $30 on oversized packages, in line with the peak surcharges first instituted in June but down from the current surcharge of $52.50.

Dive Insight:

FedEx's announcement confirms suspicions that the endless parcel peak surcharges of 2020 will continue into 2021. Since June, peak surcharges have been the norm, and FedEx is the first, but likely not the last, to confirm that they will not end with 2020.

"As long as market conditions remain similar to 2020, with limited carrier capacity, significantly elevated residential delivery volume, and relatively few carriers to partner with, this type of pricing action will continue," said Nate Skiver, founder of consulting firm LPF Spend Management. "I would expect UPS to follow suit with a similar announcement soon."

FedEx's SmartPost service is a staple of smaller e-commerce shippers with lighter packages. Skiver said cosmetics and apparel shippers, for example, are likely to be affected.

The service is an economical option for shippers sending parcels under nine pounds, Glenn Gooding, president of iDrive Logistics, said. Gooding doubts these surcharges are necessary to maintain profitability, as the carriers claim.

"I find it very contradictory that the carriers in general — they talk about this volume surge. They talk about how it’s costing them more. But if you look at their earnings reports, there are record earnings. Logic tells me they're doing it because they can get away with it," Gooding said.

FedEx reports its second-quarter earnings Thursday afternoon. Last quarter, FedEx reported an 8.5% adjusted operating margin, up from 6.1% in the same period the previous year, pre-pandemic.

Despite the likelihood that other carriers will follow suit with 2021 surcharges, Skiver and Gooding hinted that there is a shakeup in process at the bottom end of the small parcel market, which includes SmartPost. They suggested e-commerce shippers of small parcels should review their options.