Dive Brief:
- Parcel delivery discounts for FedEx and UPS shippers picked back up again in Q4 after cooling off the previous two quarters, according to the TD Cowen/AFS Freight Index.
- Better discounting benefited customers using both ground and express shipping services. For ground deliveries, the uptick tended to benefit small and medium-sized shippers, while discounts on express shipments primarily went to larger customers.
- The increase in discounts wasn't enough to blunt climbing shipping rates in Q4, however. Per-package ground delivery rates for the quarter were 34.1% above the index's January 2018 baseline, driven by peak season and residential delivery surcharges. Express rates increased to 5% above the baseline.
Ground shipping costs set to jump further with rate hikes
Dive Insight:
Rates for ground and express parcels are projected to increase further in Q1 as annual price increases take full effect, challenging shippers' wallets in an already pricey environment for delivery services, according to the index. Still, there's room for savvy customers to negotiate concessions from FedEx and UPS, Mingshu Bates, AFS Logistics' chief analytics officer and president of parcel, said in a news release Wednesday.
“That’s true anecdotally and it’s supported by data," Bates said. "After stalling over the last two quarters, discounting resumed an upward trend at the end of 2025. While not indicative of a return to the loose market of a couple years ago, it underlines the point that carriers are willing to make some concessions to secure strategically valuable volume."
The average discount increased 0.7 percentage points for Express shipments and 0.3 percentage points for Ground shipments from Q3 to Q4, Bates said in an interview with Supply Chain Dive.
The discounting activity underscores that attracting more small- and medium-sized businesses is a strategic priority for FedEx and UPS, at least for their ground shipping networks. Both companies are pushing to gain share in the SMB space, as they are often more profitable for the carriers on a per-package basis than large-scale clients are.
On their most recent earnings calls, executives at both companies reported momentum on the SMB front. UPS CEO Carol Tomé said in October that the company "took share both in volume and value" in terms of SMBs in Q3, while FedEx reported an especially strong quarter for business-to-business shipments among smaller shippers.
"We just had the best quarter in SMB share and performance that I have seen in several years, a huge shout out to both our sales and marketing team," FedEx EVP and Chief Customer Officer Brie Carere said in December. "And again, we're going to keep chipping away at this."
Offering discounts is a straightforward way for carriers to gain market share, be it for SMB customers or larger shippers. As rate and surcharge hikes persist, clients are becoming more comfortable shifting volume to a different carrier for discounts that may not have moved the needle a few years ago, Kenneth Moyer, a partner and chief supply chain officer at LJM Group, said in an interview.
"Before, no one would switch for 5 or 6% savings," he said. "Now, when 5 or 6% means this much more, more people are willing to do it."
