Over the past year, FedEx has been investing heavily in expanding its FedEx ground services, and investors are responding favorably. Why? It’s simple. To compete with Amazon and gain a strong foothold in the e-commerce industry, fast delivery times are vital, and residential deliveries are generally less profitable for logistics companies than business ones.
What does this mean to the future of FedEx and the contractors who own FedEx Ground routes? Here are some key takeaways.
FedEx Express Packages Will be Handed off to FedEx Ground When Possible
FedEx has announced that in March, residential FedEx Express packages will be handed off to FedEx Ground drivers when they can fulfill the timeline requirements. This is not only good for the company’s bottom line, but it means more volume and therefore more money for FedEx Ground contractors.
This is seen as a very smart move for FedEx and the contractors involved. Instead of having two trucks, both an Express one and a Ground truck in the same neighborhood, in many cases there will be only one. The idea of expanding FedEx Ground has been to add better residential service and reduce costs in the long run.
This shift has not been easy, as turning the tide of a large company like FedEx takes time and money both. However, in the long run, it will be worth it to both contractors and the company overall.
The hand off will be significant according to most analysts. Estimate of 60% of its residential express packages will be handled by Ground and further drive significant cost savings. It was estimated that FedEx will save up to $600 Million a year from the shift. Which is about 10% of FedEx cost in the most recent fiscal year end.
Additional Routes and the Future of FedEx
Also to compete with Amazon’s growing internal shipping network, FedEx, like many other shipping companies, has shifted to seven days a week operations from six days a week for residential ground customers. What this means is that there are even more opportunities to expand residential ground routes and increase contractor profits.
Not that this move is without challenges. Most contractors will also want to contract additional drivers to assist with these weekend deliveries. This was a necessary move in part to lift the Amazon holiday ban on using FedEx for shipping, which has just recently been lifted.
Again, these additional delivery days add up to greater volume and an opportunity for FedEx contractors to make their ground routes more profitable.
Ground Contractor Expansion Routes
With these moves, FedEx has shown its commitment to the Ground division as a vital part of the future of FedEx. The additional volume and delivery days mean that routes with large residential areas will grow and may require expansion routes to be created. This is good news for contractors and those who are looking to buy FedEx routes.
The reason is simple. Contractors can only own so many routes in any one terminal, and many only want to own and manage a certain number of routes anyway. For those who want to purchase a FedEx route, this means there will be many available that already have a proven track record and regular customers, but that will also be ripe for more growth and expansion as FedEx shifts more volume into this arm.
While this new integration will start in March, now is the time to start planning, and this may be one of the best times to buy into a route you know will grow over time.
FedEx Adaptations are Just Beginning
Because of the different nature of its divisions, FedEx has been slow to integrate them due to the complexity of doing so, but that is changing, vastly out of necessity. This has investors pleased and stock values rising. But the integrations of FedEx divisions and the company adapting to the growing and changing e-commerce market is just beginning.
FedEx Ground is an integral part of this development and adaptation, and that is good news for contractors. The Ground division is essential to the future of FedEx, especially in the residential delivery segment. The company relies heavily on its contractor network and their contracted drivers, and that’s unlikely to change anytime soon, making owning a FedEx route both profitable and worthwhile.
The Future of FedEx Ground and FedEx
The integration and adaptation of FedEx is just beginning, but the company is looking to be much more agile going forward. Here are some things you can expect from the future:
- The Ground division will interact more with the Express division and carry more of their residential workload.
- The residential portion of FedEx Ground will continue to expand and new routes and territories will be expanded.
- Express requirements may change how Ground routes are set up and routed, working for timeliness and efficiency.
- FedEx’s support for Ground routes and contractors will continue to increase the more vital they are to FedEx’s success.
FedEx Ground is the future of FedEx, and as the owner of a FedEx route, you can be a vital part of that future. Are you interested in purchasing a FedEx route, or do you simply want to know more? Contact us today at Route Advisors. We’d love to help you get started with your own FedEx route today. With all the new delivery volume, both from within FedEx and e-commerce in general, this is the time to get into FedEx Routes!