The issue of escalating shipping costs for online orders took a new turn this week when FedEx executives said retailers should pay more for shipments to offset costs.
FedEx has been expanding its network to meet growing demand, and this year plans to spend $4.8 billion. Thus far it has funded the investment largely with debt, according to The Wall Street Journal.
"We can't build these networks and spend this kind of capital and not get a return on it," FedEx Chief Financial Officer Alan Graf told WSJ.
And while the shipper has benefited financially from the boom in e-commerce, it plans to boost those returns by increasing fees, particularly on large shipments that require solutions outside its ground network.
Revenue in FedEx's ground segment increased 30 percent during FedEx's fourth quarter, thanks to record holiday shipments. But operating income fell by $2 million from the prior year, thanks to higher costs from network expansion and meeting peak seasonal demand.
Retailers are also exploring ways to offset rising shipping costs. Amazon has leased 20 jets from Boeing to build out its own fleet and even increased the minimum order to qualify for free shipping to $49 on most orders, excluding eligible books.
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