FedEx just made an announcement that’s making some pretty serious waves in the shipping community. Starting in January 2020, their service FedEx Ground will deliver packages 7 days a week. In order to make that work, FedEx will absorb all its last mile delivery volume into their own network, instead of relying on USPS like they have done in the past.
Why FedEx Ground Delivering 7 Days a Week is a Big Deal
Delivering packages 7 days a week is an unprecedented move for FedEx. FedEx Ground is one of FedEx’s most popular services, and it never included Sunday delivery. The company hopes Sunday delivery will give them a competitive edge over the other major carriers, namely USPS. As eCommerce continues to boom, customers expect delivery on any day of the week, and FedEx hopes to fulfill that demand.
FedEx President and Chief Operating Officer Raj Subramaniam offered up a quote on the importance of Sunday delivery.
“Expanding our operations to include Sunday residential deliveries further increases our ability to meet the demands of e-commerce shippers and online shoppers,” he said.
The Key Word: Delivery Density
On top of delivering 7 days a week, FedEx plans to enhance their efficiency in the last mile delivery game. Currently, USPS handles the last mile delivery for roughly 2 million FedEx packages through FedEx SmartPost. Now, FedEx plans to integrate all of those SmartPost packages into FedEx Ground operations.
Currently, roughly 20% of all SmartPost packages have been integrated into the FedEx Ground network—but that’s just the beginning. The company expects to integrate the vast majority of SmartPost package volume into FedEx Ground operations for last mile delivery by the end of 2020.
Moving Last Mile Delivery Away from USPS Will Cause Problems
Losing FedEx’s last mile delivery package volume won’t be a good thing for the Postal Service. The average daily volume of small parcels in the United States is projected to double by 2026. If FedEx captures a huge portion of that with their FedEx Ground Service, USPS will lose a ton of package volume as a result…and that’s not good for USPS.
The reasons why this is a problem for the Postal Service’s financial health are obvious. Even though USPS took a $3.9 billion loss in 2018, competitive products such as parcel delivery still account for a huge portion of the organization’s revenue. Now that FedEx Ground will start taking last mile delivery volume from the Postal Service, USPS will have to remain vigilant to make up for that lost revenue in other ways.