The Wall Street Journal reports this morning that FedEx “is offering big discounts to woo online merchants to its air network as it seeks to refashion a delivery system ill-equipped for the rise of e-commerce … The deals are being given to try to win over shippers from FedEx rival United Parcel Service Inc. and to get them to switch from what has historically been a lower-price shipping option in FedEx Ground.”
The Journal points out that this is just one of a “flurry of changes” that FedEx is embracing, demonstrating “a pivot toward a deeper tie to e-commerce shippers.” Among them are its decision to “deliver packages seven days a week starting in 2020 to serve online shoppers,” as well as “shift some two million packages out of the U.S. Postal Service network and deliver them on their own.”
In addition, “FedEx said that it would end its domestic air-shipping contract with Amazon, which makes up 1.3% of FedEx’s annual revenue, so that it can focus more on serving the broader e-commerce market, including large retailers like Walmart Inc. and Walgreens Boots Alliance Inc.
“FedEx also is vastly expanding its physical presence with plans to open on-site locations in about 8,000 Dollar General Inc. locations. That gives FedEx a wider rural footprint, where shoppers can pick up and drop off packages, including returns.”
The Journal points out that this is just one of a “flurry of changes” that FedEx is embracing, demonstrating “a pivot toward a deeper tie to e-commerce shippers.” Among them are its decision to “deliver packages seven days a week starting in 2020 to serve online shoppers,” as well as “shift some two million packages out of the U.S. Postal Service network and deliver them on their own.”
In addition, “FedEx said that it would end its domestic air-shipping contract with Amazon, which makes up 1.3% of FedEx’s annual revenue, so that it can focus more on serving the broader e-commerce market, including large retailers like Walmart Inc. and Walgreens Boots Alliance Inc.
“FedEx also is vastly expanding its physical presence with plans to open on-site locations in about 8,000 Dollar General Inc. locations. That gives FedEx a wider rural footprint, where shoppers can pick up and drop off packages, including returns.”
- KC's View:
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FedEx may want to be more competitive against UPS, but it also recognizes that it needs to compete with Amazon, which is in the process of putting its own distribution/delivery network into place. Amazon’s overall approach - which has created hundreds of distribution centers around the country designed to be as close as possible to consumers, to facilitate easier and faster delivery - is different from the revolutionary approach pioneered by FedEx some four decades ago, which now requires some updating and adjustment.
There’s a lot of business at stake. The Journal writes that “FedEx is projecting growth in online shopping will double the number of packages shipped in the U.S. to 100 million a day by 2026. It is trying to capitalize on that growth after initially balking at handling too much of the lower-margin e-commerce shipments.”
