FedEx to Raise Shipping Rates by 4.9%

FedEx to Raise Shipping Rates by 4.9%

Three little words have the power to convince an online consumer to make a purchase- “Free standard shipping.” The likes of Amazon and other retailers have made shoppers accustomed to avoiding paying shipping rates and ordering online with ease.

This luxury could see some changes in the new year. Truck driver shortage and tight capacity will likely force FedEx Ground and FedEx Home Delivery shipping rates up by an average of 4.9 percent, according to logistics and trucking news site, Transport Topics. The price hike comes into effect on 7 January 2019.

New Year, New Costs
FedEx believes the 5.9% rise in Freight rates at its two independent trucking units will enable it to improve customer service and offset operating costs. However, the pinch was a long time coming. The robust U.S. job market has helped pull more Americans out of unemployment, fueling an upswing in economic activity and freight demand.

However, driver supply has not been able to keep pace with rising freight demand. The U.S. truck driver population is aging, and younger workers are hesitant to come into the industry due to the rough lifestyle and health risks. Other sectors such as construction and manufacturing have lured potential drivers away from the field, according to Bloomberg.

Imbalance of Supply and Demand
The severe imbalance between supply and demand of truckers is hitting the economy hard in the form of fast-rising shipping costs. The shortage, which stands at a record 296,311 in the second quarter of 2018, is driving prices up faster than inflation, which is expected to rise 2.3% in 2019.

These numbers are problematic for businesses who must find whether they have the margins to absorb the cost. If not, will the consumer be willing to accommodate their rising prices? Bloomberg took a look at the economic impact saying a slowdown is inevitable.

Many companies are looking to fight the downturn by lobbying for the driver age to lower to 18. Currently, it is 21 to cross state lines. Also, benefits packages and recruiting efforts are looking to lure a younger population into the profession. Driverless trucks are also showing promise and are undergoing studies and testing to see if this is a viable option for the future.

Author:  Christine Duff

Christine wants to live in a world filled with cutting edge fashion, beautiful words and and an endless supply of leather jackets and boots. A product development grad of FIDM, she was the Editor-in-Chief of MODE Magazine where she reignited her love of storytelling. She has diverse experience within the industry with trend research, art direction and styling editorial spreads. She gained her most notable experience working in Los Angeles at the satellite operation for GQ and Vogue Thailand. Christine is passionate about social science and the role it plays in the consumer goods industry and apparel in particular.

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