In its fiscal third quarter earnings report released March 21, FedEx announced record volume during its post-Thanksgiving peak. The quarter, which closed Feb. 28 and included December and January, encompassed most of that peak holiday season.
In a quarterly earnings conference call, Raj Subramaniam, FedEx’s executive vice president of global strategy, marketing and communications, highlighted that daily volume was more than double the average on multiple days during December.
He credited continued e-commerce growth, particularly tied to the holiday season, for much of the volume increase.
“The retail and e-tail industry and consumer shopping patterns continue to evolve,” Subramaniam said. “We had record volumes over the peak season, although we had a few large customers who had volumes below their peak forecast.
“We are already well into our planning for peak 2017 to ensure we are ready to meet our customers’ needs in a profitable manner.”
Interestingly, while e-commerce is the “fastest-growing piece” of FedEx’s business, it’s also the smallest, chief financial officer Alan Graf noted during the earnings call.
“The vast majority of the volume that we carry at FedEx Corp. is business to business,” Graf said. “We can’t afford the same capital intensity for peak e-commerce volume, which is why we have been backing away from some customers and raising our prices significantly. So that balancing act will continue for us going forward.”
Don’t be fooled, though. Given the growth of e-commerce and FedEx’s well-publicized network capacity expansion, it’s clear FedEx is banking on the increasing value of B2C to its bottom line.
You may recall that at the start of the year, FedEx general rate increases (GRI) for Ground (a 4.9% average increase), Freight, and Express went into effect. The carrier also increased retailer fees by revising the dimensional weight divisor (DIM).
Those rate changes helped drive revenue increases during Q3. FedEx Ground saw a 2.2% increase in order volume, while per-package and total Ground revenue increased by more than 6% year over year.
Meanwhile, the company is seeking new online retail customers through a number of recent initiatives, DigitalCommerce360.com reports, including February’s launch of FedEx Fulfillment and the continued expansion of FedEx On-Site to include Walgreen’s stores.
As I’ve noted in the past, in the face of continued carrier profitability alongside cost increases, it’s important for e-commerce and parcel shippers to understand their shipping profile and ensure their carrier agreement is fair, accountable, and mutually beneficial.