How FedEx Should Compete with Amazon

Fedex is in a tough position. Amazon has stopped working with Fedex. At the same time, Amazon has launched its own delivery service, using independent contractors to make deliveries. FedEx also uses independent contractors to make deliveries for their Home Delivery and Ground services. Amazon’s actions have attacked both FedEx’s supply of labor and reduced demand for their services. This will increase FedEx’s costs while dropping FedEx’s shipping volumes, in a business where each additional package on the delivery truck drops straight to the bottom line.

Not a good place to be if you’re FedEx.

My company is a FedEx customer. I was given the opportunity to meet with a senior member of the FedEx executive team. The meeting ultimately didn’t happen because of a scheduling conflict, and perhaps because of the coinciding coronavirus crisis. I didn’t have a chance to pass my message of how FedEx should compete with Amazon so I’m writing it here now.

FedEx should offer a new service called FedEx Premium or FedEx “Prime”

• FedEx Premium is a service that is selected by the e-commerce customer, not the shipper. When you make a purchase on a website you will have the option to, for example, use ground, use free shipping, or use FedEx Premium.
• FedEx Premium is guaranteed 2-day shipping service anywhere in the continental US.
• The price is set by FedEx, not the shipper and is clear to the customer before purchase.
• On every FedEx Premium label is a second barcode which works as a return label.
• If the return label is scanned within 35 days of delivery, FedEx guarantees that the cost of shipping and product will be fully returned to the customer. FedEx can enforce this by levying a charge on the shipper.
• FedEx Premium relies on already-existing technology that is in-use by FedEx, their API.

Fedex could roll out a national advertising campaign that pits FedEx vs. Amazon, a little bit like Coke vs. Pepsi. Amazon has said that FedEx doesn’t deliver on time in the Wall Street Journal and in my experience that’s not true. FedEx Premium will establish a direct relationship between buyers and FedEx the same way Amazon has done with Prime. Customers will love it because they are getting a guaranteed delivery time from a brand they trust (FedEx!), a free return (Paid for by the shipper! More revenue for FedEx!), and a guarantee of a full refund (100% of the order including shipping, all on the shipper’s dime).

FedEx should offer a new service called FedEx Refrigerated

Without government regulation, Amazon has won non-perishable e-commerce in the United States, but they have not yet won grocery. FedEx should pick a small young tech-oriented city roll out a service that mixes normal ground packages with food and grocery delivery in refrigerated trucks. It will require partnering with a Kroger or a Walmart, but I suspect, in a world where everyone fears and hates Amazon, FedEx will find many willing partners. FedEx needs to compete asymmetrically against Amazon and meet or beat the cheap shipping prices of Fulfillment by Amazon while delighting recipients.

Good luck, FedEx, as customers of your services, my company is rooting for you!