Logistics companies such as FedEx and United Parcel Service have begun asking for higher rates from retailers as deliveries surge amid the ongoing COVID-19 pandemic. Both companies have raised prices in the double-digit percent range for some shippers, according to a report Wednesday from the Wall Street Journal.
“With the surge of demand for parcel shipments, it’s shifted to a carrier market,” Hannah Testani, COO of freight analytics company Intelligent Audit, told the Journal. “With such few carriers that can truly move national shipments, the carriers have almost unlimited pricing power.”
The Journal noted that a UPS’ chief sales officer said in April that the company tries to keep price increases between 2-3% but adjusts on a “customer-by-customer basis.”
The coronavirus has resulted in a surge in residential deliveries, which are less profitable than commercial deliveries. Amid the pandemic, 70% of UPS’ deliveries are residential, up from 50% before.
Shippers who do not like the price increases could possibly renegotiate their carrier contracts.
“Nine out of 10 shippers are leaving money on the table,” Robert Martinez, founder and co-CEO of consulting firm Shipware told Supply Chain Dive.
Both FedEx and UPS delivered a lower rate of packages on time in May amid the pandemic, data from analytics firm ShipMatrix revealed. Both companies could not make preparations for the surge in demand like they ordinarily do before the holiday season.