Consultant Insight: Are FedEx Express’ new services a competitive threat to DHL and UPS?

FedEx Express plans to continue to take advantage of a global airfreight market still struggling with capacity and combine it with the growing demand for e-commerce. Some of the plans, announced during its recent earnings call, target regions where fellow express providers UPS and Deutsche Post DHL dominate the market. [caption id="attachment_69752" align="alignright" width="298"] Cathy Roberson, Cargo Facts Consulting senior consultant and Air Cargo World columnist[/caption] During FedEx’s March 18 third-quarter earnings call for the fiscal period ending Feb. 28, Brie Carere, executive vice president and chief marketing and communications officer, noted that, from a demand perspective, Asia-Pacific outbound has recovered to pre-COVID levels, while Europe outbound is expecting a partial recovery by the end of 2021, and a full recovery sometime in 2023. “With these projections, demand trends will continue to favor freighters and integrators. We are confident in our ability to maintain high yields for at least 12 months,” Carere said. As such, FedEx Express plans to introduce two Europe-focused services during its fourth-quarter period ending May 31, including a new FedEx International Priority Express service. The new offerings, which present FedEx’s European customers with two premium services within Europe, give them a choice between overnight by noon or overnight by the end of the day. FedEx Express will also introduce FedEx International Connect Plus (FICP) from Europe to the U.S. to Asia, and also within Europe, providing the service across more than 200 lanes. FICP is specifically targeted to support e-commerce customers. “We did not have an international product that really had the right features of service for serving this massive growth opportunity [e-commerce]. And we are underpenetrated,” Carere said. She also admitted that FedEx Express is behind DHL and UPS in this market today. FCIP will incorporate U.S. customs clearance capabilities that benefit low-value e-commerce, allowing a lower-cost entry into the U.S. for the customer. Also, FedEx is automating its clearance capabilities. Known as Entry Type 86 , this U.S. Customs Border and Protection (CBP) pilot allows for entries valued at less than $800 to be filed for clearance. "When you think about the intercontinental, we actually, today, have the leading value proposition from Europe to the United States, and we're going to double that,” Carere said on the call. “So we are going to have a dramatic advantage over both UPS and DHL. We're adding nine origin countries. So it's going to allow us to really expand both our B2B share and our B2C share outside of the major markets in Europe.” However, UPS and DHL are also a part of the CBP Entry Type 86 pilot program, and they're already taking advantage of it in their existing express services. UPS Worldwide Express takes one to three business days with delivery by 10:30 a.m. or noon that includes in-house customs clearance. According to the UPS website, the service allows shippers to send packages to 140 countries and territories, and receive packages from all valid UPS origins. Likewise, DHL Express' time-definite international (TDI) services enable delivery at predefined times and include in-house customs clearance. According to its website, DHL Express reaches more than 220 countries and territories. FedEx believes that its two new Express services, combined with its intra-European road network that was fully integrated last May, will be a competitive advantage. Carere described the network on the call as the "fastest intra-European ground network," without providing any specifics. Without additional details on FedEx's intra-European network, it should be noted that DHL is based in Germany and has an extensive European network, and UPS has also built out an impressive European network. Still, with global business-to-consumer (B2C) e-commerce estimated to grow 14.3% to $5 trillion, according to the market research firm eMarketer , there's plenty of growing room for all three express providers.

Consultant Insight: Are FedEx Express’ new services a competitive threat to DHL and UPS?

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