Battle of the Brands: UPS vs. FedEx

The largest player in the U.S. overnight package delivery business is attempting to increase its market share in the fast-delivery business next month. USPS is barely holding on to its 32 pct market share in the business, as FedEx and UPS continue to push the envelope at 31pct and 25pct market share, respectively. For the first time, shippers using Express Mail, Priority Mail, and several other parcel services will be able to get lower rates for large- and medium-volume contracts, according to the agency. Will UPS and FedEx need to cut their prices further to compete with the USPS?
Large Rate Increases For 2008
This year, FedEx and UPS announced that rates for ground packages would increase an average of 4.9pct on the ground and 6.9pct in the air (minus a 2pct cut in fuel surcharges, creating a 4.9pct increase in the air as well). So what does this mean for you? The key term we need to acknowledge is averages. Rates for certain packages will increase more than 4.9pct, while other shipments will increase less than 4.9pct , all depending on the characteristics of the package, the distance traveling as well as the service you use (ground or air).
Fuel Surcharges
If you’ve studied the fine print of the pricing that both FedEx and UPS use, the key is in the fuel surcharges. Don’t let the 2pct cut in air fuel surcharges trick you into thinking you’re saving, because you’re not. In a nutshell, carriers tack on a 0.5pct surcharge for every four cents of an increase in jet fuel prices — starting at the base price of $1.14 a gallon. With jet fuel prices up nearly 70pct since April of last year, you’re going to be paying more to for air delivery regardless of which company you use. For every eight cent increase in standard fuel prices, there is a 0.25pct jump in the fuel surcharge — starting at the base price of USD 1.50 a gallon. The price of gas has jumped nearly 50 cents over the past year, so going ground will also hurt your wallet.
The data clearly shows a significant increase from last year’s rates. But what really grinds my gears is that both FedEx and UPS have exactly the same rates for four out of six delivery services. So where can you find a cheaper overnight service?
A Possible Alternative
The fourth-largest overnight service is DHL, owned by Deutsche Post World Net AG, and holds a 9pct market share in the United States. In the same 2008 study, DHL’s prices to Huntington Beach were slightly cheaper than UPS and FedEx. Earlier this year, however, there were reports that DHL might leave the US shipping market due to considerable losses since 2004. One industry expert believes the U.S. shipping industry needs DHL to stay; fearing competitor prices would rise with DHL out of the picture.
The Bottom Line
With pricing so similar, choosing a delivery service really depends on who you can trust getting your product where it needs to be on time.