This week has seen a number of express carriers announce planned price hikes across the express sector as companies face the headwinds of a ‘much weaker market than expected’. According to the OECD, global economic growth is slowing more than was forecast just a few months ago. While global growth is projected at 3% for 2022, it is expected to slow to 2.2% in 2023. According to data published by the European Central Bank, inflation in Europe is expected to stay above 9% for the remainder of 2022. Inflation in the United States was 8.3% in August.
FedEx recently reported lower than expected results, which has propelled the company to increase prices and accelerate its progress towards $4bn of cost savings by 2025. Effective 2nd January 2023, prices across FedEx Express, FedEx Ground and FedEx Home Delivery will increase by an average of 6.9%. FedEx Freight rates will increase by an average of 6.9% to 7.9% depending on the customer.
To reduce 2023 costs in light of a ‘weaker-than-expected’ business environment, FedEx is prioritising some cost-cutting measures which include:
These combined measures are expected to save FedEx somewhere between $2.2bn to $2.7bn. According to its latest earnings report, some measures implemented in quarter one have already saved $300m. The company expects to save $700m in the company’s second quarter.
DHL Express, whilst not suffering from the same lower-than-expected performance, has also implemented price increases across its markets, largely as an inflation hedging exercise. The company announced sizeable price increases of between 5.9% and 9.9% across various markets in Asia Pacific and Europe. For the UK, for example, the average price increase will be 7.9% for Time Definite and Day Definite products.
These price hikes take effect from 1st January 2023. Describing the rationale for price hikes, the company cited higher operational costs, planned investments, inflation and exchange rate fluctuations. DHL’s pricing mechanism is comprised of a base shipment price (according to customer shipment profile), a fuel surcharge (depending on fuel price movements) and potential other surcharges.
USPS is also planning on price hikes ahead of the US holiday season, as a ‘temporary price adjustment’. The planned peak-season pricing will affect commercial and retail products. Depending on the product, prices are to increase between $0.25 to $6.50 for commercial products and $0.30 to $6.45 for retail products. The Postal Regulatory Commission will review the proposed prices before they are scheduled to take effect in October.
Source: Transport Intelligence, September 29th, 2022
Author: Paul Chapman
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