We first got this email update from the good people at FedEx Corp on Monday March 8. Not huge news, and definitely a few years in the works, but still, we found it strange how few publications seemed interested in the FedEx rebrand. Perhaps FedEx played this one close to the chest, and understandably so – the parcel carrier has officially finished onboarding all last-mile operations (those formerly handled by the Postal Service).The new, in-house service has been rebranded as FedEx Ground Economy and FedEx Ground Economy Returns.
The Memphis, Tennessee-based company has long spoken of plans to transition its postal business back within its own network. Initially, projections were for the end of 2020. Then COVID hit, and we all know how that played out.
Historically, FedEx would deliver millions of parcels deep into the Postal Service infrastructure, for the USPS to provide last-mile delivery to residences. At its peak, FedEx contracted nearly 3 million parcels to the Postal Service per day!
For the uninitiated, last-mile refers to the last-mile of road a package or parcel must travel before it arrives on a consumer’s doorstep. Of course, it’s not always a mile, but you get the point. This is the slightly sexier, consumer facing side of fulfillment, if such a thing exists…
That strategy changed, or began the slow metamorphosis around 2019, in part to build package density for the B2C ground delivery network. This is also around the time 7-day delivery schedules were launched within FedEx.
Our best guess is that much of the decision was driven by growing eCommerce retail, which was peanuts in 2019 relative to the pandemic surge a year later. Still, FedEx could just have easily kept a consistent portion of volume with the Postal Service for a bit of passive income.
This might have created an opportunity for FedEx to be a bit discerning about how to use Ground. For instance, perhaps a partnership with USPS allowed the parcel carrier to employ its own last-mile services for the most well established retail clients. it’s possible that what stopped FedEx from doing just that, however, is the company’s desire to regain control over its last-mile operations and consolidate services under the umbrella of FedEx offerings.
In fact, our research for this exact article uncovered little about the actual rebranding. Instead, what we found was shared uncertainty over the relationship between FedEx and the USPS as demonstrated in the suggested Google search questions like Is FedEx SmartPost faster than USPS? Does FedEx SmartPost always use USPS? Etc.
As for the completed transition from Smartpost to Ground Economy, business media is still mostly devoid of news. That said, we did dig up a few interesting nuggets that seem to run parallel to the rebranding.
We’ve swept up that bread crumb trail and itemized the most pertinent info in connection to the future of DTC for FedEx, the company’s primary competitors, as well as the many small but mighty parcel carriers scattered across the country.
Here is a job posting for FedEx Ground in New Jersey. Actually, its a local Patch.com Facebook hiring event that calls for essential workers…to help us support the economy, handling life-saving medications, and other items that keep our communities as prepared as possible during these uncertain times.
The post also offers weekly pay, emphasizes an immediate start, and promises some pretty tremendous employee benefits like tuition reimbursement, for example.
Next of note, is this listicle by The Street, which features FedEx among the top earnings to watch in the week ahead (at the time of writing – March 14). According to the article, FedEx stock has fallen 8.1% since last earnings in December. And yet, Get Report is expected to report adjusted net income of $858.2 million, or $3.31 a share, on sales of $19.9 billion after the market closes on Thursday, based on a FactSet survey of 22 analysts.
In the same period a year ago, the company posted earnings of $1.41 a share on sales of $17.5 billion. It reported net income of $559 million.
Of course, SmartPost – or now lack thereof – is not mentioned among reasons driving the company’s potential success (analysts project adjusted net earnings of $4.62 a share, on sales of $19.7 billion for the next quarter).
One has to wonder though, how the full transition to Ground Economy could not be playing some part in projections. Ecommerce is booming – the pandemic has been a catalyst for change, lighting a fire under the butts of the online retailers. The brands, third party platforms, digital payment services, etc. are no longer proofs of concept, but functional resources the American people rely on. What was once an innovation is now very much a necessity. What’s more, the prevalence of eCommerce in 2020 proved how important it has been/is/will be for brands to swallow their pride on shipping costs and zone access. Customers expect their stuff free and fast. Period.
Only a handful of companies are big enough, and operate at the scale necessary to satisfy those customer expectations consistently without going broke themselves. FedEx is one of those companies.
Still, despite consumer consensus on what shopping online should look like and how much it should post, the pandemic also proved that there are circumstances when all bets are off.
Consider the USPS. Following a near disaster around mail-in ballots, the postal service was barely able to gas up the trucks before peak season was in full effect. The holidays turned the dial up to 11 on massive pandemic order volume already jamming up the supply chain. And while parcel service was prioritized, many DTC marketers were forced into a perpetual state of damage control in order to save customer relations.
Needless to say, taking back control of the consumer side of the business, even in small increments throughout the Pandemic and in the years proceeding, has been huge for FedEx’s bottom line. It seems going forward, that more complete control will move in unison with the intensity of online shopping growth.
And still, even after all this talk of 5X growth, online shopping is still only about 30% of total retail. Ifso, factso – it’s a good time to be in the B2C parcel business, but only if carriers are prepared for the volume that will almost certainly continue to increase the longer we live in a world post COVID.
Right now, it seems like laying your money down on FedEx is a safe bet, and so we second The Street’s reported projections. Here’s to hoping the people of Carteret, New Jersey, the site of the Patch.com Facebook page mentioned above, and other small towns around the country, answer FedEx Ground Economy’s call for reinforcements.
We saw it with the Postal Service through the election, and into this past holiday season. Good last mile service is almost entirely contingent on a qualified, dedicated workforce that carriers are able to incentivize for the long haul (pun intended). So far, this is something FedEx seems to understand well. The benefits and opportunities inherent to new Ground Economy jobs are demonstrative of a culture shift within parcel carriers and other supply chain services wherein the employee experience exists on the same plane of importance as the client and customer experience.