Why prices are going up
The pricing increases will grab the headlines, but in reality they are part of a series of actions both companies have been taking to maximize profitability. In short, FedEx and UPS need to take these measures because they are seeing margin pressure as a result of burgeoning e-commerce delivery growth. That pressure shows up in different ways.
- The need to expand capacity to deal with increased costs brings about higher operational costs — at least initially eating into gross profit margins.
- E-commerce demand during peak season is putting pressure on both companies to have the right capacity in place at the right time — UPS in particular has had issues with this subject.
- E-commerce vendors are packaging inefficiently and increasingly shipping large, difficult-to-deliver items, such as trampolines or gym equipment.
