Following the eventual FedEx Ground and Express consolidation announcement, FedEx further announced that this will mostly be accomplished by June 2024. Of course, the primary question on the minds of FedEx Ground contractors is: How will this benefit or hurt my profits?
There’s good news, but the explanation is a bit complicated.
The Current Pay Model
Here’s how the current pay scale works for those considering purchasing a FedEx Ground route. For those who already own and run routes, here is a review of how FedEx Ground contractors get paid.
Up to this point, pay has been based on various factors but is primarily focused on the number of stops a driver makes and the number of packages they pick up or deliver. This pay can vary depending on the area where the route is located. For example, rural areas that are less densely populated tend to have higher pay per stop, and often miles driven between stops are also a factor.
This is why some contractors only deliver to some rural regions on certain days. This creates an interesting image in the mind of the customer. A FedEx Express truck might deliver an overnight package, but their ground package does not show up until a couple of days later.
To the customer, this is the same company. Why not just put my package on the same truck? This inefficiency and customer perception are just two reasons for the consolidation.
But when it comes to pay, if the driver delivers two packages to a given stop, and one is time sensitive, which has required them to make an additional mileage trip, a new pay model will have to take that into consideration.
Because under the new model, this would not be a benefit to new contractors. Another factor would need to be volume density.
More pay = Better and More Plentiful Drivers
Adding volume density to the mix would have a few immediate positive impacts. The first is that higher pay would mean better and more plentiful drivers. Keeping drivers has often been challenging when volumes go up and down, and route schedules are sometimes unpredictable.
FedEx Ground contractors often can’t provide the benefits other companies might, and drivers often opt to change jobs to find those perks. However, many drivers also become route owners and have more entrepreneurial goals. The ability to keep better drivers as a contractor due to better pay and having a larger pool of experience to draw from will be a huge benefit.
FedEx Ground and Express Consolidation Mean Faster Delivery Times
More plentiful and better drivers will also lead to faster delivery times. The FedEx Ground consolidation will create a shared volume that may result in route expansions, especially in suburban, rural, and other growing areas. Deliveries will be more reliable, regular, and generally faster.
This creates a cycle. Drivers are happier with higher volume density, as it makes their route easier to run. Route owners like it because it allows them to pay better and reap higher profits. And customers, both shippers, and recipients, are happier as well.
Happier End Users
The FedEx Ground and Express consolidation will result in happier end users. Those who want to do business with “green” companies will appreciate the increased efficiency and better use of resources. While this is true, the most important factor has always been fast and reliable delivery.
When a package arrives “late,” the recipient often does not blame the delivery company. They blame the shipper, who must field the customer service complaint and deal with the repercussions. If they do blame FedEx, they avoid that shipping option if given a choice when they order something online or even when shipping to friends and family.
Even though “late” can be a perception and not reality, technically, being in the services standard window is not always good enough. Consolidating FedEx Express with FedEx Ground will help change that perception and help route owners and drivers exceed customer expectations.
Greater Demand for FedEx Ground Services
All these changes result in a greater demand for FedEx Ground services. The more reliable, efficient, and fast deliveries are, the greater the demand and the greater the package volume. And as volume density is added to the package/stop equation to determine pay, the greater the profit will be for the company and individual contractors.
This new merger makes this an excellent time for new contractors to enter the FedEx ecosystem. Are you interested in purchasing a FedEx Ground Route or expanding your current business by buying a new one? Contact us here at Route Advisors. We can help you find the right route at the right price in the best location. We look forward to talking with you!