Keeping Up in the Fevered Delivery Business
Posted December 10, 2017 11:24 p.m. EST
For a recent commercial, FedEx tried something unusual. It was not set in a bustling office. It did not feature one of its distinctive delivery trucks, or even a single package.
Instead, there was a smiling Drew Brees, quarterback of the New Orleans Saints, ringing a doorbell and waving an app in the face of an unsuspecting homeowner. The message was simple.
“It’s about letting the customer know they can have control over the destiny of their package,” Raj Subramaniam, FedEx’s chief marketing and communications officer, said.
Increasingly, its customers are consumers themselves. And as the holiday shopping season approached, with online retail surging, the three giants of package delivery services — FedEx, United Parcel Service and the U.S. Postal Service — had to strategize on new ways to address people at home.
That represents somewhat of a departure for the major parcel services, specifically FedEx and UPS, which have traditionally focused on their relationships with retailers and that business-to-business connection. The Postal Service has been the nation’s mail carrier since 1792, yet only more recently have packages become an area of emphasis.
But with e-commerce sales expected to eclipse $100 billion this year for the first time, according to research by Adobe, somebody has to deliver all those goods to all those doorsteps. Today, there is more competition over the “last mile” — getting packages into the hands of consumers — than perhaps ever before. Companies like Uber, Postmates and LaserShip are trying their hand at on-demand and same-day deliveries, while Amazon may soon introduce its own delivery service, Seller Flex.
This has prompted some couriers to rethink what they are offering and how their messages are reaching different customers.
James Cochrane, senior vice president and chief customer and marketing officer for the Postal Service, said that, for most of the year, the company tries to showcase e-commerce brands and the packages they deliver in its advertising. But, now, during the peak shopping season, it is emphasizing households and neighborhood relationships.
“This time of the year, we get on the porch,” Cochrane said. “The rest of the year we’re in the warehouse.”
UPS said it expected to deliver 750 million packages between Thanksgiving and New Year’s, a 5 percent increase over last year. It expects about 65 percent of those packages to be delivered directly to homes, a spokesman said, about the same as last year.
That has prompted a variety of initiatives aimed at the “end customer,” said Louis DeJianne, UPS’ vice president of retail marketing. Though DeJianne said ad spending remains steady throughout the year, the company has tried to highlight some of its e-commerce-related offerings through an increase in digital ads. Among them are UPS Access Point, which allows customers to pick up packages from a locker at a designated location; Saturday deliveries; and a program that makes it easier for customers to handle returns.
“We looked at how consumers engage with the retailer from searching, buying, checkout, delivery, on through to return,” DeJianne said. “When we analyze the needs of retail, we recognize that reverse logistics is also important to the consumer.”
A few years ago, the Postal Service sought to end its Saturday delivery practices for budget reasons. Now, the Postal Service is delivering packages even on Sundays in major cities during the holiday rush. An estimated 6 million parcels a day will be delivered this December.
“Everyone is being held to a new norm,” Cochrane said. “Having seven-day delivery gives us an advantage in the marketplace. We don’t talk in business days. We’re delivering every day.”
The National Retail Federation said that more people planned to shop online this year (59 percent) than ever before, and already there have been delivery hiccups. Last week, UPS said some package deliveries had been delayed as it struggled to handle a surge of online orders on Cyber Monday.
The rate of growth for e-commerce has not been surprising, Subramaniam said. But, increasingly, he said FedEx — which counts e-commerce as 20 percent of its overall portfolio — is being held to a higher standard for three elements of its service: reliability, convenience and control.
That has shaped the corporate messaging, which has focused on informing residential customers about ways to customize delivery options (such as the ad featuring Brees) and emphasizing the scope of FedEx’s logistical network, which one recent ad described as working like “magic.”
“That infrastructure is not something that can be achieved overnight,” Subramaniam said.
Patrick Fitzgerald, FedEx’s senior vice president of integrated marketing and communications, said same-day delivery accounted for only a small percentage of the overall shipping landscape.
Satish Jindel, founder of the SJ Consulting Group, which advises transportation and logistics firms, said he did not expect Amazon to pose a major threat to the existing couriers. But, he said, the explosion of delivery demand has been a catalyst for change.
“If they don’t do it, there are a lot of small companies coming into business who are glad to do it on Sundays and Saturdays,” he said. “It will create a whole new dynamic in the parcel industry.” (STORY CAN END HERE. OPTIONAL MATERIAL FOLLOWS.) DeJianne said Amazon remains an open and communicative customer of UPS.
“As we’re moving forward with our strategies, we’re often at the table with them discussing their strategies as well,” he said. “We have a good relationship.”
Still, even without Amazon in the mix, delivery services are dealing with changing customer demands.
“It used to be that shipping was more about business days,” Cochrane, of the Postal Service, said. “Or you’d shop and shipping would be five to seven days. But expectations have changed.”