2022: What Do You Call Peak Season Surcharges in the Absence of Peak Shipping Volume?

Shippers are accustomed to paying peak season surcharges. Many will even tell you that they
are understood. After all, historically FedEx and UPS hire an army of extra seasonal employees
to handle what typically is a dramatic increase in shipping volume that pushes their networks to
the limit during the holiday shopping season.

But what happens when peak season surcharges simply reflect carriers’ ongoing and
aggressive efforts to increase their revenues and nothing more? What if peak season charges
don’t align with any real increase in shipping volume? And what if a peak season isn’t a peak
season at all?

These are but some of the questions on shippers’ minds as we near the end of a year that saw
our two largest carriers take unprecedented, aggressive steps to increase revenue – steps we
have never witnessed to such an extent since Reveel’s founding in 2006. Whether it was record
general rate increases on top of unprecedented new surcharges – including in FedEx’s case
changing the very tables used to calculate fuel surcharges to gain an additional 1.7 percent of
revenue on top of existing fuel surcharges – 2022 was surreal.

Never before have we seen such a lack of transparency that makes it virtually impossible for
most shippers to see how much their costs are going to increase without advanced data
science. Nor have we ever witnessed such an overt contrast within the carriers’ earnings calls,
when the very issues that are pointed to as reasons for cost increases – fuel surcharges being a
notable example – are pointed to as valued and strong revenue generators that hopefully don’t
go away.

Because our data scientists are able to create models that apply the myriad new surcharges,
fees and rules unveiled by the carriers and then run them against actual shipments the
hundreds of companies that rely on our platform made in any given time period, we have the
unique ability to determine how shipping costs are really impacted by the complex web of new
surcharges, rules and fees, not hypothetically, but in the real world.

When we announced in December of 2021 that the 5.9% general rate increase unveiled by both
FedEx and UPS, the largest single rate-card increase in either company’s history, would
actually impact shippers far more given the many new variables not included on the rate card,
some were skeptical. Ultimately, both carriers’ earnings reports showed our projections were
spot on. Our predictions – that UPS’s 5.9% general rate increase would actually amount to a
10.25% increase for most companies, and that FedEx’s 5.9% increase would actually amount to
a 12.86% increase for most companies – proved to be accurate. Both carriers’ revenue-per-
package skyrocketed this year.

In October of this year, we also analyzed how both carriers’ new peak season rules and
surcharges would impact shippers and their costs in comparison to last year. Those results
were also eye opening, particularly when you consider the bigger picture.

FedEx, for example, began charging peak season surcharges on September 5, 2022 – earlier
than ever before during a month that cannot realistically be deemed peak by any measure. In
fact, we found that companies shipped 1% less in September of 2022 than the monthly mean
for the year. FedEx’s most recent earnings report, with volumes far lower than expected, only
reflected that reality.

Even so, as we noted in our news release, the average FedEx customer will see its peak-
specific costs increase by 7% this year, but will pay 14% more for shipping this peak season
than it did last year. And the average UPS customer will see its peak-specific costs increase by
5.3% this year, but will pay 10% more during this year’s peak season than it did last year.

These are not small adjustments, let alone during a year already marked by historic increases.
Nor do they account for a free pass we are giving the carriers on a point that while not
statistically relevant, is nonetheless noteworthy for context: what do you call peak season
surcharges levied against customers when there is no peak shipping activity and just as
importantly, are they fair?

Those who paid FedEx’s peak surcharges in September would likely argue no. And as macro-
economic trends, including inflationary pressures and rising consumer debt, continue to roil the
U.S. economy it’s a question that regrettably may not be completely hypothetical, even if highly
unlikely, when applied to the entire holiday shopping season.

Regardless, this year’s peak season is yet another irrefutable indicator that our two largest
carriers will continue to aggressively increase what it costs to move parcels from one point to
another – a reality that makes the shipping intelligence needed to make smart decisions in real-
time more applicable, and more necessary, than ever before.

The time to discover your shipping costs dramatically increased or even worse, made entire
product lines unprofitable, is not after shipments occurred. Now more than ever, it’s imperative
for shippers to know what kind of costs they are looking at now and in the months to come.

Note: Both FedEx and UPS unveiled a 6.9% general rate increase for 2023 – the highest
increase in either company’s history. Reveel will soon release its complimentary GRI analysis
shippers can use to determine how much their specific shipping costs will increase in 2023
based on their unique shipping profile. It’s a service we developed to ensure that shippers are
able to accurately forecast their budgets and not be caught off guard when they receive their
first quarterly bill in 2023.

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