Parcel pricing is intentionally difficult to decipher, with intricate rules and constant shifts leaving uncertainty as the only constant for shippers. While price increases were once announced on a predictable, annual cadence with plenty of advance notice, carriers are making increasingly frequent, creative changes that take effect quickly.

Subtle changes, such as shifting ZIP Code-zone alignments, fiddling with fuel surcharge tables and bumping up late fees, can add up to major cost increases. But with low-demand characterizing the parcel market following the COVID-era boom, shippers flexed some negotiating power. Reports of carriers handing out discounts emerged in late 2023 and discounting grew to unprecedented levels over the next year and a half, as carriers competed to protect their slice of a soft market. Yet as 2025 went on, discounting activity finally began to cool as Wall Street expectations and other pressures pushed carriers to take back control of pricing power.

This tug-of-war between discounts and incessant pricing changes makes it increasingly difficult to gauge the state of the market as a whole and how individual pricing compares. To provide a complete view of parcel pricing, the TD Cowen/AFS Freight Index tracks $39 billion in annual transportation spend, including actual net charges that factor in accessorials. Analyzing the latest data can reveal the net effect of shifting pricing dynamics and offer actionable strategies to control shipping costs.

Express Plods While Ground Booms

Despite all of the noise about pricing changes, express parcel rates have actually remained relatively flat, with Q3 2025 rate per package index forecast at just 2.3% above January 2018 levels. In fact, for the last five years, the express parcel rate per package hasn’t deviated more than 4.5% from that baseline. While carriers have taken steps to squeeze out more revenue, market dynamics have posed a formidable headwind to upward pricing momentum. The volume growth simply isn’t there. Express volumes are under siege from carriers’ own ground networks, which can rival express performance at lower cost, and a diversifying carrier landscape — including new or bolstered offerings by the United States Postal Service, Amazon, and regional carriers.

Ground pricing is a different story. Even as deflated volumes and discounting have shaped the market since 2023, ground parcel pricing has remained elevated — a testament to subtle yet potent pricing actions by FedEx and UPS. The ground fuel surcharge is a prime example. From Q2 2024 to Q2 2025, the UPS ground fuel surcharge increased 18.6% and the FedEx equivalent rose 16.3% — even as the price of diesel fuel fell 7.8% over the same period.

The ground parcel rate per package reached an all-time high in Q2 2025 of 32.0% above the January 2018 baseline. Along with myriad price increases, cost-conscious shippers moving volumes in and out of ground networks contributed to elevated rates. At the top end, shifting volume from more expensive express service bolsters ground demand with higher-value packages. At the bottom end, shippers tired of chronic price increases are diverting lower-value, lightweight packages out of FedEx and UPS ground networks to slower, cheaper services.

While carriers wield major pricing influence even when demand is soft, shippers are not helpless. Here’s how two shippers pieced together winning parcel spend strategies that made all the difference in their bottom lines.

Carrier Optimization Delivers Aggressive Savings

A major consumer electronics company split $100 million in annual parcel spend between FedEx and UPS, siloed with one carrier handling retail shipping and the other handling e-commerce deliveries. Internal stakeholders were satisfied and hesitant to switch, but after corporate leadership mandated a 20% reduction in parcel spend in response to skyrocketing costs during the pandemic era, the company shifted focus toward deeper carrier optimization.

The approach centered on strategic volume consolidation and service optimization, a carefully modeled split to maximize overall value. To make this hybrid approach work, analysts evaluated how shifting volume between carriers would impact volume-based, tiered discount thresholds. The resulting allocation framework balanced contractual commitments and cost efficiency to achieve optimal cost for the shipper.

The new structure delivered on the original cost saving target and setup the company with detailed forecasting and dashboards to track shipping patterns and flag irregularities in real time. The ongoing monitoring delivered immediate value in the first month, uncovering a costly fulfillment error that, if left unaddressed, would have resulted in over $700K in additional cost.

Expert Curiosity and Spend Management

A fast-growing discount retail chain with over $40 million in parcel spend needed to keep shipping costs under control, particularly through contract negotiation with their primary carrier. With limited internal resources dedicated to parcel management, they rely on an ongoing analytics engagement with an outside parcel spend advisor who provides the expert curiosity to shine the spotlight on costly mistakes that might otherwise go unnoticed.

Parcel carriers tend to make errors in batches — systemic billing issues rather than isolated one-offs. One week, the retailer temporarily lost its standard discount on all shipments. With hundreds of thousands of packages in transit, a missing three percent discount could easily be dismissed as a normal cost fluctuation. However, monthly analyses flagged the discrepancy and allowed for quick resolution.

Another issue arose when a new carrier contract took effect. The carrier had to update pricing tables, and for three weeks, they did not properly apply the discount structure — an expensive oversight caught only through proactive review and monitoring. Similarly, many shipments were mistakenly hit with residential surcharges, even though deliveries were going to store locations. Address validation helped correct the misclassification and recover up to $300,000 in overcharges.

One of the highest-priced cost leaks came courtesy of a vendor incorrectly selecting overnight services for low-cost items. The charge for overnight was technically correct for the service offered, so it would not have been flagged in a standard audit. But by combining a deep understanding of business rules with detailed analysis of shipping patterns, analysts uncovered the mismatch between shipping costs and the business value. This insight led to the discontinuation of a costly practice, eliminating an estimated $500,000 in excess spend and underscoring the value of persistent, intelligence-driven cost monitoring.

Tactics to Give Shippers an Edge

FedEx and UPS often mirror each other’s pricing tactics in ways that leave shippers with limited recourse. Still, shippers can take action to get relief from ever-higher shipping costs.

Stay vigilant

Parcel pricing structures are intentionally complex, and carriers frequently adjust rates without clear notice. To avoid getting blindsided by these changes, shippers need to know where to look and act fast once updates are made.

Scrutinize every invoice

The complexity of account-based discounts, fees, and fluctuating surcharges makes billing mistakes common on FedEx and UPS invoices. Shippers could be paying for incorrectly applied charges, and rectifying these requires a process to catch errors and submit claims.

Negotiate your rates

While the market dominance of FedEx and UPS does give them an upper hand in bartering, shippers do not have to accept contract rates as-is. Working with a specialist can help shippers negotiate discounts and other terms that make the most sense for their business.

Explore regional alternatives

Due to lower operating costs and less aggressive price increases, regional carriers are typically less expensive options. But as the name implies, these carriers have limitations that national carriers do not, so determining if and how to incorporate regional options requires careful evaluation.

Of course, many businesses lack the time and specialized knowledge to effectively evaluate carrier pricing and optimization strategies, much less keep a close eye on every invoice. An outside parcel expert can help shippers level the playing field, with the deep industry knowledge to help businesses carve out the right strategies in a complex, evolving market.

Mingshu Bates is Chief Analytics Officer and President of Parcel, AFS Logistics.