- Continuing our list from Part 1 (click here) of this 3-Part series… Here is Part 2:
This is what’s important to know right now regarding parcel shipping rates and where the contradictions we mentioned in Part 1 begin.
2 – Competition is increasing.
The theme heading into 2025 is that the carriers are raising rates most where they are facing the least competition, which are bulk packages and longer shipments. We’ll address this more and what you can do about it later in this report.
While U.S. parcel volume last year didn’t change significantly from 2022, total volume was up 0.5% from 21.5 billion to 21.7 billion packages.
UPS and FedEx are facing greater competition than ever, much of it from regional carriers. USPS has always been an important competitor (and sometimes partner) to both carriers. Last year, the USPS generated the highest parcel volume of any company, at 6.6 billion parcels. Notably down almost 1% from last year, however.
An “others” category that includes regional carriers and some postal-hybrid solutions increased its share from 2% to almost 3% of the market, with revenue growth of 32.5% in one year, to $5.6 billion in 2023 from $4.3 billion in 2022.
USPS has a “GRI” of its own going into effect on January 19. Notable is that Priority Mail, Priority Express Mail, and Ground Advantage increases are lower than in January 2024 as competition continues to grow and USPS hopes to increase market share.
Highlights from the announcement include:
- Priority Mail will increase 3.2% in 2025 (compared to a 5.7% increase in 2024)
- Priority Express Mail will increase 3.2% in 2025 (compared to a 5.9% increase in 2024)
- USPS Ground Advantage will increase 3.9% in 2025 (compared to a 5.4% increase in 2024)
- Parcel Select will increase by a large 9.2% in 2025 (in addition to the 25% increase taken on July 14, 2024).
- First-Class stamps will not increase.
3 – FedEx and UPS Volumes Are Decreasing.
FedEx and UPS are feeling the increased competition and overall shrinking parcel volumes.
In 2023, also parcel volume was up slightly overall, and revenue declined slightly for the first time in 7 years by 0.3% from $198.4 billion in 2022 to $197.9 billion, reflecting high capacity built after the pandemic and intense competition. An even greater decrease impacted UPS and FedEx.
UPS (fiscal year ending December 31, 2023) parcel volume declined 10.3% from the previous year to 4.6 billion parcels. And while UPS generated the highest parcel revenue of the major carriers at $68.9 billion, it was down 6.4% year-over-year.
FedEx (fiscal year ending May 31, 2024) parcel volume declined 6.1% from the previous year to 3.9 billion parcels. Second to UPS was FedEx at $63.2 billion, but down 3.1% from last year.
UPS had the largest parcel revenue market share, with 35% of the market, a 2% decrease from 2022, followed by FedEx, with a 32% share in 2023.
Footnotes:
https://www.contimod.com/package-statistics/
4 – This Year Was Filled with Rate and Surcharge Updates.
Given the challenges UPS and FedEx are facing, it’s understandable why their largest GRI increases are so targeted. The carriers are trying to squeeze more revenue out from where they can.
2024 has definitely been the Year of the Surcharge, and 2025 will probably be similar. There have been other changes, too, that will keep shippers on their toes.
Note there is a complete list of all UPS and FedEx rate change announcements in the Appendix below.
Other notable changes include:
· Rule changes, such as implementing a Minimum Billable Weight will increase many companies’ costs.
· The International Demand Surcharge implemented at the start of the pandemic has been coming and going depending on the lane. Companies need to make sure they understand how and where their international shipping costs may be impacted.
· It’s a good thing that money-back guarantees are still inching back, and more services have become reliable again. This means auditing invoices is still important to do.
· Fuel Surcharge Tables have become Several updates throughout the year. By the way, the carriers have been increasing the list of other fees and surcharges that are now fuel-surcharge eligible.
· Other details, like what zip codes are eligible for Delivery Area Surcharges (DAS) have also been expanded.
· Overall, FedEx and UPS are very aligned with pricing.
This is a lot on information to digest to really understand how your parcel shipping will be impacted as 2025 continues! In Part 3, we’ll conclude with useful ideas on what you should do next.
In the meantime, contact sales-info@transimpact.com with your questions.