FedEx is cutting prices for some customers of its Express network, including offering two-day air service for the same price as ground shipping
FedEx is grappling with how its Express air network fits in a shipping economy increasingly dominated by low-margin online orders. Photo: david w. cerny/Reuters By Paul Ziobro June 23, 2019 7:24 pm ET FedEx Corp. FDX -1.49% is offering big discounts to woo online merchants to its air network as it seeks to refashion a delivery system ill-equipped for the rise of e-commerce.
FedEx is grappling with how the Express air network fits in a shipping economy increasingly dominated by online orders for everything from toothpaste to T-shirts. Founder and Chief Executive Fred Smith started the Express unit four decades ago to ferry shipments like legal documents and medical supplies over long distances.
UPS is overhauling its network to adapt to the online-shopping boom, spending billions of dollars to build large automated sorting facilities and delivering packages six days a week. For customers ordering online, it is more important to deliver shipments by a particular day rather than by a particular time.
One way it is adapting its Express network is with a service called Extra Hours, by which drivers do a sweep of AutoZone Inc., Best Buy Inc., Target Corp. and other stores late at night to pick up online orders bound for nearby homes. The packages are then brought to a nearby hub, where packages brought in on jets are sorted. They all go out on FedEx Express vans for delivery the next day.
Discounting air shipments to close to what FedEx charges in its Ground network would push yields down further. FedEx Ground’s yield was $8.87 in the third quarter.
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