Consultant Insight: Walmart, FedEx acquisitions highlight e-commerce rise

The recent e-commerce acquisitions by Walmart of JoyRun and FedEx of ShopRunner point to a major shift in supply chain focus. [caption id="attachment_69752" align="alignright" width="298"] Cathy Roberson, Cargo Facts Consulting senior consultant and Air Cargo World columnist[/caption] JoyRun is a peer-to-peer last-mile delivery platform that allows users to pick up and deliver items for friends and neighbors, and ShopRunner is a membership-based online platform where retailers such as American Eagle, Nieman Marcus and Bloomingdale’s sell directly to consumers. For a $79 annual fee, ShopRunner members receive such benefits as free 2-day shipping, free return shipping and member-only deals. The JoyRun acquisition allows Walmart “to further augment our team and ongoing efforts to explore even more ways to deliver for customers in the future,” according to Srini Venkatesan , executive vice president at Walmart Global Tech. Venkatesan added that the acquisition could complement Walmart’s SPARK program for independent contractors and existing third-party delivery providers. Competitive pressures from Amazon and, to a lesser extent, Target, are pressuring Walmart to expand its last-mile solutions. Walmart has introduced a number of ways to reduce its in-house last-mile delivery costs, including the launch of buy online, pickup in store; curbside pickup; an infamous trial program to have Walmart employees deliver goods; and partnerships with crowd-sourced, last-mile providers such as DoorDash and Instacart. As the COVID-19 pandemic has driven consumers to online shopping, delivery of online orders, particularly groceries, has jumped in terms of growth by at least three years in just a matter of months, according to Walmart U.S. CEO Doug McMillon. Small parcel providers have also noted increased e-commerce volumes. Brie Carere, executive vice president, chief marketing and communications officer for FedEx, observed in FedEx’s latest earnings call for the period ending Aug. 30 that “e-commerce, fueled substantially by this pandemic, is driving the extraordinary growth [of parcel volumes]. In fact, 96% of the U.S. [parcel volume] growth is expected to come from e-commerce.” As retailers work to expand supply chain and last-mile capabilities, FedEx appears to be preparing for head-on competition with Amazon and other online marketplaces via its ShopRunner acquisition. “The acquisition aligns with our continued efforts to create an open, collaborative e-commerce ecosystem that helps merchants deliver seamless experiences for their customers,” said Raj Subramaniam, president and chief operating officer, FedEx. “We are committed to growing the ShopRunner platform and combining it with our global digital and logistics intelligence to create new possibilities in e-commerce.” ShopRunner will operate as a subsidiary of FedEx Services, which provides functions like technology, communications, technical support, marketing, billing and sales. “In pursuit of our purpose of creating the future of retail, we have built the foundation of a cross-brand ecosystem to create a simple shopping experience for consumers, and to aggregate the scale of our network for our partners’ benefit,” ShopRunner CEO Sam Yagan said of the acquisition. “FedEx will accelerate our existing capabilities and align with our goal of creating new products and services that advance a more open, collaborative e-commerce ecosystem.” FedEx has been ramping up its e-commerce capabilities since cutting ties with Amazon last year when it declined to renew Amazon’s Ground and Express contracts. FedEx has expanded its third-party pickup locations to include such retailers as Walgreens and Dollar General, and has established partnerships with other online platforms, such as BigCommerce, to offer discounted shipping and other perks through its FedEx Advantage Program. Operationally, FedEx noted in its most recent earnings announcement for the period ending Aug. 30, that it had added six regional sort facilities and four new automated stations, and expanded last-mile delivery services to seven days per week all year. But will this be enough for FedEx? The integrator was intensely scrutinized by the press after cutting its Amazon ties and reporting disappointing earnings after the breakup. Amazon’s in-house parcel delivery group is expected to be about the same size as FedEx by the end of this year, according to an Oct. 27 presentation by analyst Ravi Shanker of Morgan Stanley. The e-commerce giant is also expected to launch third-party delivery in the U.S. in 2021, and to grow to the size of UPS by 2022, he said. Was ShopRunner the right acquisition for FedEx? Should it instead have acquired same-day or crowd-sourced last-mile capabilities, like those offered by online technology platform Bringg? And what of UPS? Will we see UPS make similar acquisitions soon —and could Shopify perhaps be a target? FedEx’s acquisition of ShopRunner is a shift away from the types of acquisitions made by FedEx and UPS in the past, when the focus was on transportation or contract logistics. By acquiring ShopRunner, FedEx has acknowledged that Amazon is indeed a competitor, perhaps an even bigger one than UPS.

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