FedEx volume down, but revenue per package increased - ShipRx
Blog / Dynamic pricing: the secret to FedEx’s $150 million profit
2 minutes read

Dynamic pricing: the secret to FedEx's $150 million profit

As UPS makes headlines thanks to a looming strike, FedEx is (finally) getting some good publicity. When FedEx’s stock dropped 21% in a single day last year, onlookers wondered whether the carrier would bounce back. After its Q3 earnings call on March 16, the answer is clear— FedEx is bouncing back, and its future looks bright.

How did the carrier pull off such a dramatic turnaround? What does this mean for current customers? And is now a good time to switch to FedEx if you’re using UPS? This post will give you a glimpse into FedEx’s strategy and how to make it work for you and your business.

The Fiscal Year 2023 Q3 report

In the earnings presentation, the carrier shared that it has mitigated 45% of its total revenue declines on an adjusted basis by reducing flights, salaries, and benefits expenses.

Has service faltered? Aside from suspending Sunday deliveries in specific locations, it doesn’t appear so. FedEx Ground is back to pre-pandemic service levels with an average delivery time of two days within the US. It’s also enhancing the customer experience by adding innovations like picture proof of delivery.

The average daily package volume for FedEx Express and Ground both experienced declines (-14% and -11%, respectively), proving a sentiment expressed by FedEx Chief Executive Raj Subramaniam last year, “The main macro issue in the United States is the e-commerce reset. E-commerce now makes up 18% or 19% of all retail sales in the country, down from a peak of 22% during the pandemic. It was 16% before the pandemic.” Despite these challenges, FedEx Ground and Freight experienced an 11% revenue increase per package and shipment.

An increase in revenue despite a decline in volume?

In the earnings call, FedEx attributed a profit of $150 million to its dynamic pricing infrastructure. This strategy “enabled holiday peak residential surcharges to adjust dynamically based on individual customers’ weekly peaking factor.” The same technology that allowed the carrier to identify times when it overbilled customers will be used to manage customer performance and contract compliance to increase its revenue.

What does this technology mean for existing customers?

While FedEx has the technology to know whether they’ve overcharged a customer or should adjust the invoice based on failing to uphold its service guarantee, those refunds aren’t automatic. That’s where ShipRx’s parcel audit software comes in. Our software automatically identifies incorrect charges and service failures, our team handles disputes with the carrier, and your refund is directly credited to your bill.

Does it work? Don’t take our word for it. Here’s what a customer said about our parcel audit service, “We were already using another audit company when we were referred to ShipRx. Switching to their platform more than doubled our monthly recovery.”

Is now a good time to switch to FedEx?

As carriers experience a decline in shipping volumes, there’s no better time to switch carriers or renegotiate your current contract. Let us help you with your FedEx contract negotiations to ensure the best rates.

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