- FedEx reached a new multi-year agreement to transport the majority of shipments for e-commerce bulk products seller Boxed, the companies announced Thursday. Full terms of the deal were not disclosed.
- The agreement will allow more Boxed customers to access seven-days-a-week service via FedEx's weekend delivery offerings, according to a news release. It will also help Boxed reduce customer delivery costs, which increased nearly 10% YoY in Q1.
- The effects of the agreement will start kicking in "going into the back half of this quarter," Boxed CEO Chieh Huang said on an earnings call last week. "At a time when all you're hearing about is cost increases and inflation, we feel incredibly fortunate to be able to announce the partnership which will not only provide us with transportation cost savings, but will also improve service levels to all of our customers."
Landing a deal that will help lower transportation costs is a notable win in a time when parcel carriers still exert noticeable pricing power. AFS Logistics and Cowen Research’s ground parcel index, which measures shipping costs, is expected to jump from 21.8% in Q1 to 24.6% in Q2, mainly due to fuel surcharges.
For FedEx, the agreement with Boxed marks growth in two key focus areas: expanding its e-commerce customer base and boosting its weekend package volume. FedEx President and COO Raj Subramaniam said in March that the company's strategy is to position itself in the center of e-commerce with a diverse mix of customers, despite a slowdown in online shopping activity.
"We made a specific decision to invest in capacity and double-down on e-commerce three years ago. We saw we were skating to where the puck was going to be and seeing where the market was going," said Subramaniam, who was recently announced as FedEx's next CEO.
Complementing the logistics giant's e-commerce focus is FedEx Ground's expansion to year-round, seven-days-per-week home delivery service. The company touts Sunday home delivery coverage as a competitive advantage over UPS — the FedEx rival offers Sunday residential delivery via SurePost service, in which it hands off shipments to the Postal Service for the final-mile delivery, per its website.
"We have the best seven-day transit and coverage in the market," FedEx Chief Marketing and Communications Officer Brie Carere said on a September earnings call. "We feel really good about our value proposition."
Boxed brings more e-commerce volume and weekend density to FedEx, but it also introduces the challenge of delivering larger packages filled with bulk consumer products, like a 24-pack of Charmin toilet paper. Boxed says it can't ship to PO Boxes due to its boxes being "too big to qualify," according to its website. FedEx and other parcel carriers have been exploring how to more efficiently handle large and bulky items as home delivery demand for them grows.