FedEx to Skip Holiday Surcharges for Most Orders--Update

FedEx Corp. said it won't charge additional fees for most orders during the holiday season, in contrast with United Parcel Service Inc., undercutting its main rival as they battle for e-commerce customers.

The decision by FedEx, announced Thursday, is a gamble that it can cover the extra costs during a period when daily volume can double to more than 26 million packages. It will charge extra fees for deliveries requiring additional handling, which include larger and irregularly shaped packages, as well as oversize packages, which now make up 10% of its ground-shipping volume.

UPS has set considerably different pricing for the holiday season. In June it said it would charge extra for most packages delivered to homes around Black Friday and Christmas. While the per-package fee ranges from 27 cents to 97 cents, analysts estimate that UPS could generate tens of millions in revenue from the fees.

Patrick Fitzgerald, a FedEx senior communications and marketing executive, said the decision wasn't a competitive response to UPS. "This is really about ensuring that we price effectively," he said in an interview.

UPS declined to comment on FedEx's move but defended its strategy.

"UPS's peak-season pricing positions the company to be appropriately compensated for the high value we provide at a time when the company must double daily delivery volume for six-to-seven consecutive weeks to meet customer demands," it said in a statement.

Both FedEx and UPS are spending heavily to adapt their networks to handle the uptick in e-commerce orders they are seeing. Research firm eMarketer Inc. predicts that online sales will increase 17% this holiday season to $107 billion, far outpacing the expected 3.1% growth in overall retail sales during the same period.

UPS's surcharges include additional fees on oversize packages delivered from Nov. 19 through Dec. 23 in an attempt to shift large parcels to the company's freight network and free up space during the holiday season. The company has said that it expects most of its customers will agree to the surcharges.

FedEx is focusing on the largest packages, with extra fees in effect from Nov. 20 through Dec. 24. They include a $25 surcharge on oversize packages, which currently are hit with a $72.50 charge to ship, and a hefty $300 surcharge on so-called unauthorized packages, which exceed the maximum size that FedEx allows but that it sometimes delivers at its discretion. Those typically carry a $115 charge. It is also imposing an additional $3 fee on any package that requires additional handling.

Write to Paul Ziobro at Paul.Ziobro@wsj.com

(END) Dow Jones Newswires

August 03, 2017 10:00 ET (14:00 GMT)