Both UPS and FedEx recently announced their 2017 General Rate Increases, or GRI (read about the increases in our Resource Center). This year, the carriers announced their GRI about six weeks earlier than usual, meaning we can expect to see the SurePost and SmartPost rates soon.
For now, we know the FedEx and UPS GRIs differ somewhat, but it’s important to unpack the details of how the two compare on a more detailed level.
Put simply, the 2017 GRI shows that FedEx and UPS are in a game of GRI chess.
Instead of competing by price-matching, which would cause prices to keep dropping, FedEx wants to increase its market share in small package types.
UPS, on the other hand, wants to gain market share with the dimensional weight pricing technique that calculates weight by scanned dimensions. UPS understands if there are efficiencies in its network as well as capacity, it can add a few bigger packages and identify growth opportunities.
FedEx’s minimum charges are less than those UPS assesses. This move is designed to optimize its network, and has little to do with customers. As we’ve shared, many carrier innovations are developed more with this end-goal in mind than with providing convenience and cutting-edge service to customers.
This is part of a long-term FedEx strategy. The company always wants heavier packages with smaller sizes; the 2017 GRI is just another step in that direction. The rate change helps FedEx get the exact package types it wants, because it penalizes shippers who don’t fit its optimized model. Specifically, by changing the DIM threshold to 139, FedEx penalizes shippers who don’t ship within its preferred dimensions.
For example, a 10x6x15 box – a common size for shoe and bakery boxes – could result in a substantial increase to the shipper’s annual parcel spend. While the new DIM model may only be a $1 to $1.10 difference per package, this would have a major impact on those who ship thousands of packages a year.
It’s important to assess the FedEx and UPS pricing strategies to see the potential impact to your annual spend. Need help? Let VeriShip analyze your data to see how the 2017 GRI could modify your shipping costs.