FedEx to raise prices in the coming year

Blake Farmer Dec 27, 2011

Adriene Hill: Now if you still haven’t shipped that brick of fruitcake to your favorite cousin — now might be a really good time to get it done. FedEx will raise some of its shipping rates about 5 percent starting in the new year. And online retailers are paying especially close attention.

Blake Farmer of WPLN in Nashville reports.

Blake Farmer: You can’t blame gas prices. Memphis-based FedEx is reducing a fuel surcharge which will offset some of the rate hike.

The truth is, FedEx is busy, says analyst Art Hatfield with Morgan Keegan.

Art Hatfield: Quite frankly, right now, transportation markets are fairly tight.

Hatfield says FedEx has to charge higher rates so it can afford to hold on to good employees.

Online retailers will be some of the ones absorbing the cost. Consumers have become conditioned to expect free shipping, which isn’t free at all to online retailers. Shipping costs ate up 18 percent of their revenues this year, according to market research firm IBIS World. And free shipping isn’t going away.

Rob Coon: It’s definitely a bigger deal this year.

Rob Coon is senior vice president of DydaComp, which helps small businesses run their e-commerce operations.

Coon: It still seems like something that they’ll need, especially with the threat of 2012 Internet sales tax rules changing.

Online retailers could be forced to collect state sales taxes in the next few years. Coon says they can’t afford to drop free shipping and still compete with brick-and-mortar stores.

I’m Blake Farmer, for Marketplace.

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