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FedEx, UPS and the Postal Service: Where Shipping Rates Are Headed

FedEx and UPS are ready for the most wonderful – and profitable – time of the year.

UPS announced Tuesday that it plans to hire up to 95,000 workers during the busy holiday season – perhaps so as to avoid a repeat of last year's struggles. Last year, the company had planned to hire 55,000 seasonal workers, but was forced to add 30,000 additional hires to handle the surge in deliveries. Still, UPS was blamed for ruining thousands of customers' Christmases, when it couldn't deliver last-minute orders on-time even with the extra employees.

UPS's biggest competitor, FedEx, is also planning on boosting its holiday hiring numbers. On Wednesday, the company announced plans to hire more than 50,000 extra workers to handle holiday-season package deliveries – more than double last year's plan to hire 20,000 seasonable workers. While FedEx has a smaller slice of the ecommerce market than UPS, the company also faced criticism when it failed to deliver packages on time for Christmas 2013. 

However, FedEx's biggest recent business decision is going to hit the company after all the Christmas stockings are put away. 

Related: How Consumers Contributed to the Shipping Nightmare on Christmas

On Tuesday, FedEx announced that it will implement rate increases for its Express, Ground and Freight services as of Jan. 5. In all areas, the company's U.S. shipping rates will increase by an average of 4.9 percent. The company's decision to apply dimensional weight pricing to all FedEx Group shipments, announced in May, will also take effect in January.

UPS has not announced any plans to increase its own prices.

At the heart of all these changes is the increasing importance of the ecommerce market. FedEx is already cashing in on online shopping. On Wednesday, the company announced that ecommerce drove FedEx's Ground's "very strong" performance in the first quarter, which resulted in revenue of $11.7 billion, up 6 percent from the previous year. The U.S. Postal Service also hopes to lure big ecommerce companies, introducing new lower rates for customers who ship at least 50,000 parcels a year, much to FedEx and UPS's chagrin.  

More than anything, shipping services don't want to be left behind in the ecommerce rush. Failure to anticipate last-minute online shoppers was the downfall of UPS last holiday season. It's a mistake that neither UPS nor FedEx is willing to make again. 

Correction: An earlier version of this article misstated UPS's seasonal hires figure for 2014.

Related: 6 Ways to Whip Your Business Into Shape Before the Holidays (Infographic)

Edition: October 2016

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