FedEx aims to boost service, profit more from online shopping

FedEx Corp said on Thursday it will begin offering Sunday residential delivery and handoff fewer e-commerce packages to the U.S. Postal Service, as it works to bolster service and wring more profits out of the online shopping boom.

FedEx said it will offer year-round, seven-day U.S. ground delivery starting in January 2020. It now offers Sunday home delivery in the United States only during the peak holiday season.

Memphis-based FedEx and rivals ranging from United Parcel Service Inc to Amazon.com Inc are seeking to reduce the cost of delivering packages the so-called “last mile” to online shoppers’ doorsteps by increasing the number of packages they drop of at each stop.

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“We’re going to be the premium, low-cost delivery provider” for the last mile, said Raj Subramaniam, FedEx’s president and chief operating officer.

FedEx aims to do that by shifting the delivery of nearly 2 million FedEx SmartPost packages from U.S. Post Office (USPS) mail carriers to the service providers who handle FedEx Ground residential package deliveries.

FedEx since 2016 has used technology that allows it to put a FedEx SmartPost package into the FedEx Ground network when another package is destined for the same or nearby address.

It is accelerating that matching effort and expects the vast majority of FedEx SmartPost package volume to be integrated into FedEx Ground operations for final delivery by the end of 2020.

“We believe this makes sense for (FedEx) as costs at the USPS are rising and FedEx continues to focus on improving margins and efficiency in its networks,” Cowen & Co analyst Helane Becker wrote in a client note.

Shares in FedEx closed down 1% at $158.01 on Thursday.