FedEx, UPS vary approaches to holiday deliveries

FedEx will forgo most holiday surcharges on home deliveries this year, drawing a contrast with plans for steppedup fees at United Parcel Service amid a surge in online shopping.

Additional holiday charges will apply only to packages that are big or bulky enough to require special handling, FedEx said Thursday. UPS’ extra levies will bump up the cost of residential deliveries by about 3 percent.

The fee structures represent sharply different approaches at the couriers, which have been contending with a rush of home deliveries as e-commerce continues to expand. FedEx may be able to woo small businesses or individual shippers away from UPS, where they’d have to pay the extra fee, said Kevin Sterling, a Seaport Global Holdings analyst.

“FedEx is smaller on the ground side than UPS, and they can probably take a little more volume during peak,” he said. “They’re going to let UPS be Scrooge at Christmas.”

Large customers with contracts won’t be affected by the additional fees, Sterling said.

UPS said the surcharges were needed to pay for increased operations over the crucial holiday period.

“UPS’ 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,” said Glenn Zaccara, a spokesman for UPS. He declined to comment on FedEx’s announcement.

Both companies are trying to discourage large, heavy and odd-size shipments because they clog normal networks and require additional handling, Sterling said.

If a customer insists, he’s “going to probably pay more in shipping costs than the value of the item,” Sterling said. “They’re going to make them pay through the nose.”

The volume of oversize and odd-shape packages handled by FedEx’s ground-delivery network has surged more than 240 percent in a decade as consumers buy a wider range of goods online, from trampolines to mattresses. Such items now make up about 10 percent of the ground unit’s volume.

Online retail sales in the U.S. are forecast to hit $590 billion by 2020, up from $390 billion last year, according to Forrester, a research and advisory firm.

“It’s really a pricing decision based on the dynamics,” Patrick Fitzgerald, senior vice president of marketing at FedEx, said in an interview. “There is a significant shift, largely driven by growth of e-commerce and expansion of e-commerce into sports equipment, furniture, mattresses and other things that weren’t largely available on e-commerce 10 years ago.”

The surcharge decision is not a competitive response to UPS, he said.

Mary Schlangenstein is a Bloomberg writer. Email: maryc.s@bloomberg.net