FedEx Uses USPS for 30.4% of Ground Shipments

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:

FedEx Uses USPS for 30.4% of Ground Shipments
FedEx Uses USPS for 30.4% of Ground Shipments
  • 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 are less in the 2nd Quarter than in the 1st.  Unclear whether this is due 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 than economic recovery.
  • FedEx appears to has made a conscious decision to focus on B-2-C shippers.   Its portfolio of services is tailored to 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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