Dive Brief:
- FedEx expects to fully onboard its large-package delivery deal with Amazon by the carrier's third quarter, which runs from December to February, EVP and Chief Customer Officer Brie Carere said on an earnings call Thursday.
- The arrangement announced in May had minimal impact on FedEx's first quarter, according to Carere. But once onboarding is complete, the Amazon volume "will support continued U.S. domestic revenue growth in the quarters ahead," she added.
- FedEx will deliver the volume — consisting of heavier-weight parcels — as part of its Ground portfolio, Carere said at a May investor conference. She emphasized that the deal isn't on the scale of Amazon's UPS arrangement, which is shrinking as UPS prioritizes more profitable shipments.
Dive Insight:
FedEx executives touted Amazon and several other customer wins in the earnings call as the carrier looks to maintain momentum in a volatile trade environment.
For example, Carere pointed out Best Buy's recent decision to name FedEx as the retailer's primary national parcel carrier. Best Buy will tap into an "advanced visibility tool" from the delivery giant to provide real-time tracking and customer order communication, she said.
"By providing customers with more timely and accurate updates, the company also expects to reduce support calls, cancellations and reship costs," Carere said.
Beyond large-scale shippers, FedEx grew revenue tied to U.S. small- and medium-sized businesses by more than 10% YoY in Q1. Small shippers are a lucrative target for both FedEx and UPS, and FedEx is leaning on direct sales, its loyalty program and other tactics to gain an edge.
"This was fueled by focused and targeted sales execution and a close alignment between our sales and our operations teams," Carere said of the revenue jump. "This collaboration is accelerating onboarding, shortening deal cycles and driving meaningful new acquisition."
FedEx is overhauling its U.S. operations in the midst of these customer additions. The company's Network 2.0 plan aims to merge its historically separate Express and Ground networks to boost its bottom line and improve its competitive positioning.
Through that effort, FedEx is shuttering dozens of facilities to minimize operational overlap. The company has closed about 140 facilities and converted 360 stations to handle the combined volume so far, President and CEO Raj Subramaniam said on the call. As progress continues, FedEx exited Q1 with 18% of its U.S. average daily volume flowing through the new Network 2.0 model.
