Modern shipping is all about consolidation. More shipping partners means more capacity that can be injected into or removed from a fleet as needed — and more money saved on costs like vehicle maintenance and repairs.
In line with that trend, one of the nation’s largest shipping providers this week made it much easier for merchants to tap into on-demand delivery services.
FedEx (NYSE: FDX) on Tuesday announced that e-commerce shipping platform Shippo was awarded a first-of-its-kind Platform Account with the carrier, a move that will allow Shippo to offer discounted FedEx shipping services to the tens of thousands of U.S.-based merchants on its platform. Shippo is the first multicarrier shipper to sign such an agreement with FedEx.
Those services include an array of offerings under FedEx Ground Economy and FedEx International Connect Plus (FICP) that will allow the carrier to reach more small- and midmarket e-commerce sellers.
As of Tuesday, all U.S.-based Shippo merchants have access to discounted Ground Economy and FICP rates within the company’s web app. The companies did not specify the size of the discounts.
“Our goal of building the shipping layer of the internet means connecting our tens of thousands of merchant customers with the best, most diversified set of carrier and delivery options as possible,” said Laura Behrens Wu, co-founder and CEO of Shippo. “Our expanded agreement with FedEx — the first of its kind for FedEx with a shipping platform — is a massive step towards our mission of simplifying shipping for all merchants.”
In addition to discounted rates, Shippo merchants will receive Ground Economy perks like 24-hour package visibility through FedEx tracking, insurance coverage of up to $100 and the ability to use their own custom shipping boxes.
And on the FCIP side of things, merchants will be able to track shipments 24 hours a day, schedule shipments with a day-definite service and redirect deliveries to convenient pickup locations for customers, among other benefits.
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“We’re thrilled to expand our relationship and continue to team with Shippo to make shipping better and easier for small and mid-sized businesses,” said Ryan Kelly, vice president of marketing at FedEx.
On its surface, the agreement appears to be a win-win-win for FedEx, Shippo and Shippo’s customers. FedEx expands its access and reach among merchants who may otherwise have looked to a cheaper option. Shippo, meanwhile, makes itself more attractive to merchants, and sellers on the platform can now ship both nationwide and internationally at a lower cost.
The deal is reminiscent of Amazon’s Buy With Prime agreement with BigCommerce, which provides merchants on the BigCommerce platform with access to Amazon fulfillment services like free and next-day delivery.
The FedEx-Shippo news will be particularly welcome for Shippo merchants that already use FedEx. The carrier in September announced the largest year-over-year general rate increase in its history (6.9%) for 2023, but now those sellers will avoid at least part of that hike.
FedEx rival UPS (NYSE: UPS), meanwhile, also announced a record-high 6.9% general rate increase late last year. In addition, the carrier faces a potential labor fiasco in a few months, when its contract with the Teamsters union — which represents around 350,000 of its workers — is up.
“What is interesting about this [FedEx-Shippo] deal is the timing,” opined Satish Jindel, whose firm, SJ Consulting, has worked with FedEx for 25 years.
Jindel told FreightWaves that if the Teamsters strike, FedEx may have been better off saving its extra capacity for shippers making the switch from UPS rather than adding it now.
“But conversely,” he continued, “it could be a sign that FedEx does not expect any material volume diversion from UPS, and that may be a great endorsement … to [CEO Carol B. Tomé] and UPS’ plans for handling the labor talks and keeping the network open with nonunion workers.”
Whether FedEx can steal some of UPS’ volume — and whether that volume will be up for grabs at all — is unclear. But in the short term, the carrier is positioned to receive a significant bump in order volume through Shippo.
Click for more FreightWaves articles by Jack Daleo.
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