Direct marketers and express carriers are watching closely as Federal Express Corp., Memphis, TN, launches its much-anticipated new service, FedEx Home Delivery, next week.
The service, which was announced with much fanfare in January, is a ground service that allows FedEx to compete more directly with leading ground carriers such as United Parcel Service, Atlanta, which ships the majority of ground business-to-business and business-to-consumer parcels. However, delivery companies are changing their strategies and offering new services in a scramble to get a bigger bite of the e-commerce market.
FedEx Home Delivery, which targets BTC shippers, will be managed separately from the FedEx Ground operational network, even though it will use FedEx Ground for pickup and package sorting. In preparation for the launch, FedEx Ground opened 67 facilities in the 38 largest U.S. markets this month and said the service will be deliverable to 50 percent of the U.S. population. Another 340 facilities are expected to open in the next four years so the shipper can reach 98 percent of the population. The rollout follows a six-month test with a dozen catalogers in the Pittsburgh area.
“Our pilot test has done really well,” said spokeswoman Betsy Momich. “In fact, we are coming out of the gate with many customers – some of whom were using FedEx express services but not ground, and others who were FedEx ground customers who are eager to have residential options, and others who were UPS customers.”
Companies that have signed up for the service include Omaha Steaks, Omaha, NE; Hanover Direct Inc., Weehawken, NJ; Summit Racing Equipment, Akron, OH; Northern Tool & Equipment Co., Burnsville, MN; Day-Timers Inc., Allentown, PA; and Tupperware Corp., Orlando, FL. Most of these firms are current FedEx customers.
By choosing the basic FedEx Home Delivery option, catalogers will be able to offer delivery in two to five days, which is two to three days faster – on average – than UPS ground, from 9 a.m. to 8 p.m. Tuesday through Saturday.
While FedEx would not give specific pricing for the service, a spokeswoman said it is competitive with UPS’ ground residential rates and is based on the same eight zones across the country. FedEx Ground will offer premium service options, such letting consumers request what day or time to have a package delivered or to set up an appointment for delivery within a one-hour window.
FedEx expects to market the service with a series of print ads in national transportation, fulfillment and direct mail newspapers later this month. At the same time, it will launch a direct mail campaign to its existing ground and express customers and prospects.
UPS officials said they aren’t concerned about the service and haven’t seen any customer attrition yet.
“They say imitation is the sincerest form of flattery,” said spokesman Norman Black. “We understand that our competition is belatedly recognizing the need to serve the residential market, but we still know that there is no other company that offers the range of services that we do.”
Analysts also are watching the launch but don’t see any effect – at least not yet.
“Delivery services are not something that people switch to automatically,” said John Barnes, a transportation analyst at Scott & Stringfellow, Richmond, VA. “Think about other competitive services, such as [email protected], where Airborne partners with USPS and offers a ground home delivery service. They have had this running for a couple of quarters now, and they are only up to about 10,000 packages per night.”
UPS has 15,000 relationships with e-vendors, Barnes added, and “when you’ve already got that kind of head start, it’s going to be difficult to catch up. There’s only one way to do it [and] that’s to try to keep costs down. FedEx is already experiencing a lot of difficulties because of the fuel surcharges, so it is going to be very hard for them to agressively bid on home delivery business and still maintain profitability.”