FedEx Uses USPS for 30.4% of Ground Shipments

FedEx’s 2nd quarter earnings release illustrates its business focus on e-commerce and home delivery.   Highlights are as follows:

From the press release:

“Our improved performance was largely a result of effective yield management programs and strong demand for FedEx Home Delivery and FedEx SmartPost services,” said Frederick W. Smith, FedEx Corp. chairman, president and chief executive officer. “With the healthy growth in online shopping this holiday season, demand is increasing for these residential delivery services.”

Tidbits on FedEx Ground and FedEx SmartPost From the Statistical Book:

  • 30.4% of FedEx Ground shipments are delivered by the United States Postal Service.
  • 8.4% of FedEx Ground revenue is generated by shipments delivered by the Postal Service
  • Revenue per shipment for FedEx SmartPost is up 4.1%  In its press release, FedEx says the difference is due to fuel, suggesting that contract prices prior to fuel surcharges are nearly unchanged from 2010 levels. The challenge FedEx has raising prices confirms the price sensitivity of the small parcel market.
  • FedEx Ground Shipments delivered by FedEx grew by 3.5%.
  • FedEx SmartPost Shipments delivered by the Postal Service Grew by 17.0%

Tidbits on FedEx Express From the Statistical Book:

  • Express business is relatively weak, as U.S. domestic express volume is down 3.7% and international priority volume is down 2.7%  from 2010 levels.
  • The decline from 2010 levels less in the 2nd Quarter than in the 1st.  Unclear whether this is do to a slight improvement in the economy or easier comparisons.
  • FedEx Express’s weakest product is the Envelope. Volume declined 7.0% from 2010 levels
  • The average revenue from an overnight envelope is $11.48; for an overnight box is $22.05.   These are the prices that the Postal Service’s contract rates must compete with.

Implications from FedEx Results

  • There are some questions about the future of the overnight envelope.  The volume decline suggests that e-diversion is having a greater impact that the economic recovery.
  • FedEx appears to has made a conscious decision to focus on B-2-C shippers.   Its portfolio of services are tailored for these shippers.  Furthermore, its heavy use of the Postal Service for delivery indicates that it wants to provide a one-stop shop for these shippers.
  • The growth of FedEx Ground will exceed the growth of UPS Ground for another quarter.  FedEx, including shipments delivered by the Postal Service is taking market share away from United Parcel Service.
  • FedEx will have a very strong 3rd quarter, as it will have a higher proportion of home delivery shipments than is found in other quarters and on-line shipments are expected to grow in the mid to high teens this quarter while brick and mortar retail sales will be between flat and low single digit percentages.

 

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6 Responses to “FedEx Uses USPS for 30.4% of Ground Shipments”

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  1. Jack Heisler says:

    That’s just perfect, I live on a rural route in East Haddam, CT and the post office will not deliver packages to my house. So… when we have something sent by Fedex we have to drive 36 miles to the post office to get it. UPS is the way to go, never any problems. No wonder the post office is in trouble. I would like to see a lot more of their branches close.

    • M.C. says:

      So, you hate the post office because they’ve ceased delivery to your rural route in CT (I’m certain they did deliver there, at some point). This is why you are angry at them, and you feel that they are “in trouble”… and yet your solution to this would be that they close a lot more of their branches.

      You know, because that UPS delivery price and level of service would definitely improve if there weren’t any competition in the market.

      See if you can get UPS to deliver you some basic logic.

      • N.M. says:

        This “merger” is nothing but trouble. I had a package sent “FedEx” over three weeks ago. It made it to the local Post Office, then was turned around and sent back to the shipper (the Post Office pays for this) because the address was deemed deliverable. I called the shipper, FedEx, and the USPS and no one could figure out what happened. The USPS couldn’t even give me the address listed on the package. I will never use FedEx again because they use the USPS for final delivery.

  2. Christie says:

    The only reason that the post office loses money is because Congress mandates it. It still is supported almost entirely on it’s own revenue and manages to deliver the vast majority of letters in three days or less for a handful of change. They may set the lowest standard but it is still something for FedEx and UPS to try and improve upon to be competitive. Otherwise FedEx and UPS would become the next corporate leech (http://www.techdirt.com/articles/20130118/17425221736/cable-industry-finally-admits-that-data-caps-have-nothing-to-do-with-congestion.shtml) based purely on profit and not service.

  3. Steve says:

    Thats actually a great business model. The government run USPS loses $40+ mil a day, which is made up by taxpayers. USPS can charge less than they should bc the tax payers subsidize its losses. FedEx Ships 30% of its orders thru this artificially cheap program where taxpayers foot the bill. Brilliant. No wonder FedEx CEO made $14+ mil in salary last year.

  4. Daniel says:

    How dare they not send their drivers 40 miles to the middle of nowhere to drop off packages? It’s not their fault you choose to live in Bumbuck, Egypt. If you’re going to live away from civilization, you have to take the good with the bad. Celebrate the fact that the USPS is efficient enough to tell hicks that they aren’t wasting an hour to deliver their HSN gadgets, not that political strategies are forcing them to be over budget.

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