FedEx Ground delivery volume grew 6% in the quarter which is stronger than total industry growth. This growth was paced by FedEx SmartPost where "average daily volume increased 24% due to growth in e-commerce and gains in market share. FedEx SmartPost revenue per package increased 8% primarily due to growth in higher-yielding services and increased fuel surcharges."
Since 2008, FedEx SmartPost has grown from 4.9% of FedEx Ground Revenue to 7.4% of Ground Revenue in 2011. During the same period, FedEx SmartPost has grown from 15.5% to 27.7% of shipments that FedEx Ground picks up from its customers.
In the conference call a FedEx executive on the call made the following statements:
- "Smart Post is a key part of a residential delivery portfolio.
- There are a lot of light weight items in that network.
- It gives us a competitive network.
- It allows us to focus our home delivery network on heavier items and items that require special features such as day definite or time definite delivery.
Implications for the Postal Service
FedEx's success with SmartPost raises questions about the success of the Postal Service's Parcel Select and Parcel Select Light products. Clearly FedEx's volume is growing faster than the Postal Service's reported volume. FedEx SmartPost appears to be taking market share away from other parcel consolidators that drop parcels at postal facilities. Also, the growth of FedEx SmartPost suggests that the Postal Service may have some pricing power in its parcel select products, particularly in terms of delivering light weight parcels for more remote locations, that it needs to explore as it tries to maximize profits from its parcel products.