FedEx Corporation, the U.S. MNC delivery American delivery services company is beefing up its home delivery services as e-commerce items are getting bulkier which include products such as exercise equipment and home improvement items, which shoppers are buying online, thanks to a surge in sales due to the ongoing COVID pandemic.
The company is known for its overnight shipping service and pioneering a system that could track packages and provide real-time updates on package location, a feature that has now been implemented by most other carrier services. Its final -mile deliveries of bulky goods through its FedEx Direct service (operated by its FedEx Freight arm) have grown from 80% of the US market to 90%, and to support this, the integrator is building five large package facilities and expanding three others.
FedEx,also one of the top contractors for the US government has historically discouraged the transportation of bulky items in their parcel networks, especially those that cannot be handled by its conveyor systems.
Competitor company UPS had announced in summer a surcharge of $50 for large shipments and a whopping $250 for shipments that exceed its maximum limit. Just last year FedEx launched a pilot programme for deliveries of bulky online purchases and began to set up special facilities to handle this voluminous traffic.
CEO of logistics consultancy Spend Management Experts, John Haber agrees this type of traffic is simply too big and fast-growing to ignore. He further added that the pandemic had given a sharp boost to the segment’s growth, as consumers ordered home office and exercise equipment and spent more on home improvement.
“Either they refuse this traffic or they find a way to deal with it. If they refuse it, they hand a competitive advantage to others, ” said Haber.
FedEx delivered more than 750,000 bulky shipments between 1 June and 31 August, the period when coronavirus was at its peak and the country saw total lockdowns.
Competition for the transportation of bulky products has gained a lot of momentum and intensity. On Sept 16, Forward Air announced the acquisition of CLW Delivery, a $20m-a-year trucking company, which specialises in final-mile and in-home installation, for $5.5m. This was Forward Air’s fourth acquisition in this sector, which began with rival Towne in 2015.
Last month, non-asset transport provider AIT Worldwide Logistics launched “an economical large parcel delivery service” across the US. A lot of players are moving into this space,” Haber said. “Everybody is trying to come up with a solution.”But FedEx and UPS still don’t want big, bulky shipments in their parcel networks, and the FedEx Direct service through FedEx Freight is an effort to solve this conundrum, he added.
The old set-up was unwieldy, Mr Haber explained: “With FedEx, at one point you could have four different pick-ups in a day. For a shipper, that meant having to isolate the volumes and schedule four pick-ups.” While the expanded delivery of bulky items is a stab at this segment, it is not an all-out effort to build up this business, he pointed out.
FedEx offers two service variants, with the standard option delivering the item into the first room in a house, and the second to a room of the customer’s choosing, plus removal of the packaging. However, there is no set-up or installation included, which will diminish the service’s appeal to many consumers, believes Haber. And nor are FedEx and UPS likely to try to attract this business with aggressive pricing, he added.
“They’re pricing it to make money,” he said, adding that the most recent round of surcharges targeted large B2C shippers and bulky shipments.“The surcharges are not going to go away. Profitability is a key component of this,” he said in a concluding statement.