FedEx to e-Comm Shippers: “Oura Rings – Yes ; T-shirts – Meh”
Last week, we talked about how FedEx plans to close 30% of its stations by the end of next year. Changes for the carrier come with a cost— and that cost is premium. Raj Subramaniam, FedEx President and Chief Executive Officer, told stock analysts and industry stakeholders at the recent Investor Day, “FedEx is now entering a new era as we build the most flexible, efficient, and intelligent network in history. Our vision is simple: to make supply chains smarter for everyone.”
But not all customers are included in that “everyone.”
Today, we’re talking about FedEx’s new strategy that could drive small-and medium-sized businesses away from FedEx.
FedEx Prioritizes High-Margin Verticals
During its February 12 Investor Day, FedEx highlighted strategies to achieve its financial goals: growing its high-margin verticals, leveraging data and technology, transforming the network through Network 2.0, and fulfilling efficiency gains through the DRIVE process.
FedEx defines its target high-margin verticals as healthcare, automotive, aerospace, data centers, and the premium end of e-commerce. So what does that mean for non-premium e-commerce brands?
Chief Customer Officer Brie Carere says, “If you’re shipping T-shirts, FedEx might not be for you. But if you were shipping Oura rings, FedEx is for you.”
Seventy percent of FedEx’s ground service revenue comes from shipments traveling over 300 miles. Carere says, “Our strategy is to prioritize the high-value segments where our network provides a distinct advantage — long haul, heavyweight and cross-border e-commerce. Unlike those focused on the last mile, our strength is end-to-end solutions.”
FedEx currently serves around 30% of the $95 billion B2C shipping market and aims to increase that share as its high-end e-commerce clientele grows worldwide.
The carrier is de-incentivising low-end e-commerce by pulling subsidies to e-commerce surcharges, defending the move by saying retailers should properly compensate FedEx for its infrastructure and service.
Action Plan for Non-premium E-commerce
Carere says, “We no longer constrain ourselves to just peak surcharges at Christmas. We have to adjust when we've got capacity. So I like the environment. It is competitive, rational, better than last year...”
We have to ask, better for whom?
She says FedEx is “adjusting our pricing strategy to cover all costs to make sure that we’re getting paid for our differentiation,” but in a cooling market, it feels like a cash grab for customers facing rising costs and new surcharges each year.
E-commerce businesses depend on reliable, affordable shipping, and ShipRx can help you get it.
If you’re a current customer, consider renegotiating your FedEx contract with our help. We have a 100% success rate helping clients save money on shipping across all industries.
Unhappy with the saving potential with FedEx? Let us help you negotiate a contract with UPS. UPS recently took on Amazon volume from FedEx, proving its ability and willingness to deliver low-value e-commerce.
Contact us for a free Savings Analysis and find out how, from the smallest B2C to the largest B2B, we can help you save. FedEx may not be for everyone, but ShipRx is.