FedEx and UPS Unveil Exceptional Discounts for SMB Customers

Dive Brief: FedEx and UPS continue to offer shipping discounts to attract new customers, resulting in lower delivery costs despite rising fuel surcharges, according to the TD Cowen/AFS Freight Index, which was released on July 16. In the second quarter, the ground parcel rate per package was 26.8% higher than the index's January 2018 baseline, down from 28.9% the previous year. Rates are likely to settle at 25.7% over the baseline in the third quarter as discounting activity continues. "Small- to medium-size shippers are seeing exceptional discounts that might typically be reserved for much larger customers," Micheal McDonagh, president of parcel for AFS, said in a news release. Discounts keep ground parcel shipping expenses under control. TD Cowen/AFS Ground Parcel Freight Index compared to its January 2018 baseline. Dive Insight: The index originally expected that Q2 prices would rise modestly year on year, but FedEx and UPS have defied predictions by maintaining aggressive discounts to attract small company volume. According to an AFS Logistics Q3 index presentation, "the ongoing pricing competition between FedEx and UPS is expected to extend beyond earlier projections, with negotiation activities in Q3 further diminishing the effects of the GRI." "Both carriers are more aggressive in their discount offerings to small and medium customers while holding discounts for large customers steady." Discounts are often volume-based, with higher volumes resulting in greater savings, a structure that advantages larger shippers, according to Mingshu Bates, Chief Analytics Officer at AFS Logistics. However, in the current market, smaller clients can obtain pricing historically reserved