FedEx Will Ring in 2025 with Big Rate Increases

On the heels of its new fuel surcharges — as well as holiday surcharges — last week FedEx announced its annual general rate increase for 2025. Effective January 6, 2025, a general rate increase of 5.9% will go into effect. You can read the details here, but the carrier’s new published rates reflect a significant increase for standard services such as ground and next-day air. This is the second year in a row that FedEx has increased rates by 5.9%.  

But there’s more to the story. Some rates, such as FedEx 2Day, will increase by as much as 7.2%. And accessorial fees are also rising significantly. Domestic Additional Handling surcharges are increasing up to $11.50 (28%) — per shipment! Domestic Large Package surcharges will be higher by $65 (29%) — again, per shipment. Residential Delivery surcharges will grow by 7%, and Delivery Area surcharges will increase by 6% to 12% next year. 

We all get it. FedEx has had a tough year, including the loss of its $1.7 billion air cargo revenues from USPS. They’re dealing with increased operating expenses, including labor. We’ll probably hear the rationale for these rate increases during FedEx’s next earnings call on September 19. 

But this is not good news for shippers who rely heavily on FedEx. Not only will parcel shippers pay higher fees, but they’ll be forced to navigate a complex web of surcharges based on distance, region, package size and special handling requirements. 

If you’re thinking UPS might not follow up with its own aggressive rate hikes, think again. These two dominant carriers typically mirror each other’s general rate increases. FedEx might be the first out of the gate, but we can expect a similar announcement from UPS soon. 

How Can You Profitably Navigate These Changes? 

While we all understand that carriers are facing higher costs, guess what? Your business is also being affected by general inflation, rising labor costs and other economic forces. You shouldn’t have to lose more margin by paying significantly higher shipping costs — just to help the big carriers maintain their own profits. 

It’s easy to feel powerless when faced with unilateral rate increases from the world’s major parcel carriers. But the truth is, shippers do have power. These carriers need your revenue. Here are some proactive measures you can take right now to optimize your parcel shipping costs for 2025 and beyond: 

• Analyze your shipping patterns. Every parcel shipper is unique. Look closely at your most common package sizes, weights, destinations, delivery timelines and volumes. Now match these behaviors to carriers’ published rates. What carriers make the most sense, from a cost and service standpoint, for your specific needs? And remember you’re never limited to FedEx and UPS. There are a lot of other options. 

• Renegotiate your carrier contracts. Every carrier has a list of published, standard rates. But they’re also open to negotiation. Use your buying power, shipping volume and competitor rates to exert pressure on your carrier of choice. 

• Explore best practices that bring costs down. By automating internal processes, employing new packaging strategies, optimizing your network model and applying other best practices, you can bring your overall shipping costs down. Those internal efficiencies can more than make up for rate increases. 

• Measure carrier performance and use this data strategically. Many shippers are so busy meeting demand that they fail to answer the question, “Are my carriers meeting my service expectations — and billing me accurately?” It’s worth the time and effort to measure carriers’ service and audit their invoices. Every year, 75% pf parcel audit refunds go unclaimed. 

Redwood: The Parcel Expertise You Need, Delivered Flexibly 

If this sounds like a lot of effort — and you lack the internal resources to support it — why not turn to Redwood?  

With years of extensive experience, our Parcel Advisory experts can apply leading-edge tools and methods to analyze your shipping volumes, timelines, package characteristics, delivery modes, destinations, and other data. Then they can help optimize your carrier mix, explore improvements to the network model and negotiate better rates.    

As a Modern 4PL, Redwood offers a comprehensive, flexible range of solutions and services. And, no matter which one they choose, parcel shippers save an average of 12% in costs in the first year alone by partnering with Redwood. 

As carriers’ base rates and add-on surcharges continue to increase, it’s time for parcel shippers to educate and empower themselves. Redwood is firmly in your corner as you work to achieve a more profitable 2025, even in light of these cost increases. Reach out to Redwood and let’s start planning your next move now.