If the carriers’ earnings calls increasingly leave you with a sense of déjà vu, you are not alone. Regardless of shipping volumes, macroeconomic conditions or geopolitical events, revenue increases for carriers and price increases for shippers are the new normal.
FedEx’s Q4 and FY 2022 earnings reported on June 23, 2022 were no exception. Revenue increased 8% year-over-year for the quarter and the company continued to see increases in revenue-per-package, or RPP. While some gains in RPP are a reflection of efficiency gains and other factors, price increases passed onto customers are the primary driver.
Notably, RPP increased across all of FedEx’s segments, including FedEx Express and FedEx Ground. The RPP for FedEx Express of total U.S. packages increased from $18.76 in Q1 FY2022 to $22.08 in Q4 2022 – nearly an 18% increase – while at FedEx Ground, RPP increased from $10.29 in Q1 FY2022 to $11.41 in Q4 FY2022 – nearly an 11% increase. (Notably, FedEx Freight also saw a significant increase in revenue-per-shipment, with a 28% increase.)
There are, of course, many ways carriers can increase their prices. Other factors, including surcharges, significantly impact revenues and shippers’ costs. In its most recent earnings, FedEx specifically called out the fuel surcharges it introduced in response to rising jet fuel and diesel prices not as a business challenge, but as a contributor to revenue. This was the case at FedEx Express even as global shipping volumes softened, and at FedEx Ground – despite the fact that daily volume declined due to “yield management actions affecting the FedEx Ground Economy Service.”
The takeaway for shippers is clear. FedEx and UPS have shown that they will continue to take steps to increase their revenues in a way that we simply haven’t seen in the past. Unfortunately, U.S. businesses, including retailers and e-commerce companies, are not in the same position. While FedEx can transform skyrocketing fuel costs and at times even lower sales volumes – less shipping volume – into more revenue, its customers cannot.
Faced with consumers’ growing sensitivity to prices and with important shopping seasons just around the corner, it’s absolutely crucial for shippers to ensure that they have the intelligence needed to control their shipping costs and keep them in check. As reported by CNBC on June 28, 2022 “Cooped up shoppers splurged from their couches during the past two holiday seasons. Now they’ll be taking a harder look at price tags – and going elsewhere if they don’t like that they see.”
We can safely assume that this will apply to shipping and delivery costs as well.
The Reveel App uses AI and machine learning to provide an unparalleled look into what’s impacting your bottom line. Through invoice audits, peer benchmarking, and rate modeling/simulations, you can see the health of your operation and assess pricing changes from parcel carriers like FedEx and UPS. Sign up for a free Reveel account today to see how you can leverage automation to synthesize your data, ship more for less, and reduce the time needed to identify issues and action items.