COVID-19 changed the way the world interacts. The pandemic has changed shipping and the parcel delivery landscape. Naturally, more people are having packages delivered. Brick and mortar stores have limited hours, declaring bankruptcy, or just halting operations altogether. Therefore, here is some data to show how this shift has affected one of the largest worldwide parcel carriers. How different is FedEx’s US-based shipping profile from pre COVID-19 to now?
During the summer of 2020, over 65% of all FedEx packages were delivered by truck or rail. These are all packages that are only ground shipping: Ground, Home Delivery, and SmartPost. What is the difference between these services?
- Home Delivery – ground packages transported by rail or truck to a residential address
- Ground – ground packages transported by rail or truck to a commercial address
- SmartPost – ground packages transported by rail or truck with last-mile delivery by USPS
How is FedEx different pre COVID-19?
At the beginning of 2020, FedEx Home Delivery accounted for 29.9% of our customers’ shipments. FedEx Home Delivery now accounts for 33.8% during the summer of 2020. This is a 4% rise in packages delivered by Home Delivery.
Ground package delivery at the beginning of the year was 21.5%. In comparison, that has dropped to 16.5% of FedEx packages going ground to a business address. FedEx ground has experienced a 5% drop.
My sales are dropping, but shipping costs are not
Remember, commercial ground delivery usually has deeper shipper discounts than residential ground delivery. Therefore, many shippers see a drop in sales without a corresponding decrease in shipping costs. Unfortunately, you could be selling less product and still paying the same amount in shipping costs.
A reduction in sales might not result in a corresponding decrease in shipping costs. As commercial shipping moves to residential shipping, the price per package shipped will rise.
FedEx 2019 vs 2020
The most considerable change in FedEx summer 2019 to the summer of 2020 has been the drop in FedEx Ground shipping. COVID-19 changed shipping and most importantly FedEx Ground usage. In 2019, our customers saw 29.2% of packages with a final delivery at a commercial address. In 2020 this is only 16.5%. Also, the usage of FedEx 2nd Day One Rate rose from 17.6% to 25%. Consumers are demanding fast delivery. This, of course, is spurred by the Amazonification of consumer expectations. All shippers should offer a quick and cheap two-day delivery option for at least some products offered. FedEx One Rate is a great way to accomplish this in a wallet-friendly manner.
FedEx 2018 vs 2020
The most interesting take from the comparison of 2018 versus 2020 is the jump to express two-day shipping. During 2018, only 4.5% of our customers shipped packages with a two-day delivery window. Compared to 2020, about 25% of packages have a two-day delivery window across the United States.
Also, more customers have final delivery to commercial addresses. This could be because of the proliferation of the dreaded “porch pirates.” Commercial addresses have people that will take possession of a package during standard delivery times. This allows for less package theft overall.
Commercial addresses are a safer delivery method and less likely to be victims of porch pirates.
COVID-19 changed shipping and FedEx Smartpost. Smartpost has experienced a rise in usage from 2018 to 2020. FedEx Smartpost is slower but cheaper. FedEx Smartpost does not have residential or fuel surcharges. USPS is the final delivery method; the package changes hands from FedEx to a government agency. However, remember the saying, “you get what you pay for.” We see more lost and undelivered packages with Smartpost as compared to Home Delivery. A shipper might see more operational costs using Smartpost in terms of customer service staff, answering phones, or replacement of lost merchandise.
If you are considering a switch from Home Delivery to Smartpost, remember to incorporate this added cost. We do not have any metrics on the actual value of this, but it is something that you must consider.
COVID-19 shipping changes in a nutshell
- More packages are delivered to residential addresses than commercials today.
- Sales might drop, but shipping costs might not.
- More of your shipments will be going to residential addresses, and this will cost you more.
- Before a switch to FedEx Smartpost, consider the impact of additional customer service and package loss.
- Explore FedEx One Rate shipping if you are not already utilizing it.
No matter what industry you are in, COVID-19 has changed shipping. How you change and adapt will determine if you come out on top or just another statistic in a research report. Think about your shipping, bring on an expert like Refund Retriever to analyze your shipping spend. We can breakdown your shipping and determine if a contract negotiation is the right move for your company.