Dive Brief:
- U.S. e-commerce merchants using Shippo can now tap into discounted FedEx rates typically reserved for larger shippers through an agreement between the two companies, per an announcement Tuesday.
- The discounts are the result of the shipping platform receiving a FedEx Platform Account and apply to the carrier’s Ground Economy and International Connect Plus (FICP) services. A shipper doesn't have to have their own FedEx account to access the carrier's offerings, which was previously a requirement on Shippo's platform.
- “We’re thrilled to expand our relationship and continue to team with Shippo to make shipping better and easier for small and mid-sized businesses,” said Ryan Kelly, VP of marketing at FedEx, in a statement.
Dive Insight:
Tens of thousands of merchants use Shippo’s web app, which is a sizable pool of potential customers, as FedEx works to attract more business from smaller shippers and offset volume declines.
To advance this effort, the discounted FedEx services cover both international and domestic shipping needs for e-commerce merchants. FCIP allows U.S.-based packages to be shipped to more than 190 countries. Ground Economy, meanwhile, is geared toward nonurgent, lightweight and low-value home deliveries in the U.S.
The carrier has also taken steps in recent quarters to reduce its Ground Economy volume levels as it prioritized more profitable types of deliveries. Ground Economy's average daily package volume fell 35% in the quarter ending Nov. 30, outpacing a 9% decline for all of FedEx Ground's services.
But the company may need to rely more on deferred services like Ground Economy this year to counteract overall demand softening and pressures to its bottom line. Shippers have been shifting from speed-focused offerings to more cost-effective services amid inflationary pressures, Chief Customer Officer Brie Carere said in a December earnings call. The company is “working really hard to get the cost and the margins right” for deferred services, she added.
For shippers, the arrangement will help those that have been squeezed by climbing parcel delivery rates and don't have the order activity to sway carriers to provide volume-based discounts on their own.
Discounts vary based on factors such as shipping distance and package weight. However, a Shippo blog post gave an idea of the cost savings shippers can expect. One example it listed was Ground Economy costing $10.93 to ship a 3-pound package from Los Angeles to New York City, a discount of 27.5%.
The post also noted that using either applicable service via Shippo's platform provides shippers with 100% discounts on fuel and residential surcharges.
The discounts offered are large enough to create a tangible difference for both shippers and FedEx, Shippo COO Andreas Lieber said in an interview.
"They believe this creates a real competitive advantage, because in the end, they are on Shippo together with the USPS and UPS products," Lieber said of FedEx. "As you can imagine, they would have an interest here in being competitive with the rates."
Merchants can access these discounted rates via the Shippo web app. Package pickup is unavailable for either Ground Economy or FICP, meaning packages will still need to be dropped off at either a FedEx Office or certified drop off location, per Shippo's post.
FedEx isn't the only carrier Shippo has an arrangement with to provide discounted shipping. In October, the company announced its participation in the U.S. Postal Service's Connect eCommerce program. This provides Shippo customers with access to Priority Mail pricing below standard retail rates, as well as allowing them to avoid peak season rates on qualifying shipments.
