New consumer ground delivery service aims to compete with UPS

Touting itself as a United Parcel Service alternative for ground residential delivery, FedEx Corp. on March 14 rolled out its FedEx Home Delivery service, shipping packages for more than 100 catalog clients. FedEx claims that the new ground service will reach 50% of the U.S. population this year; it intends to reach 98% by 2004. The rollout follows a six-month test in the Pittsburgh area with a dozen catalog shippers.

FedEx’s executive vice president Rodger Marticke says the new service is priced virtually the same as UPS’s ground residential delivery. Instead of competing on price, though, FedEx is promoting the new business as a premium service. It offers two- to five-day guaranteed delivery (about two or three days quicker on average than UPS ground service), delivery hours of 9 a.m.-8 p.m, and Saturday deliveries. It also offers, for a small upcharge, the ability to schedule exact day delivery times (UPS will not specify ground delivery days or times). For a slightly higher charge, customers can even set up appointments for delivery within a one-hour window.

As for the cost for catalog mailers, while FedEx’s initial published rates will be nearly the same as UPS’s, catalog clients are hoping to negotiate volume discounts with FedEx, just as they sometimes can for their air delivery rates. “We’re going to negotiate rates with FedEx later, something we can’t do with UPS,” says Bruce Schwartz, vice president of distribution for date book mailer Day-Timers, which participated in the test before signing on for the March rollout. “FedEx doesn’t want to promise rate discounting at the start. But that’s sort of what catalogers are relying on.” (FedEx’s Marticke would not comment on the possibility of such discounts.)

During the FedEx ground test period between last July and February in Pittsburgh, “feedback from customers was the most positive we’ve ever had about a carrier,” Schwartz says. “We’ve been looking for consistency with our carriers. If we’re going to promise that a package will be delivered by a certain date range to customers, the carrier has to hit on it. So far, FedEx has been consistent. Pulling this off on a bigger scale, however, is going to be a challenge.”

Indeed, FedEx has limited experience in residential ground delivery. Its new service currently operates out of the 67 facilities that had made up the Roadway Package System business-to-business delivery network (bought two years ago by FedEx). FedEx claims it will open additional hubs around the country but would not provide details.

Other mailers using the FedEx Home Delivery service include Hanover Direct, Northern Tool & Equipment, and Omaha Steaks. “I’m optimistic that FedEx can and will support” the new service, says Ron Eike, Omaha Steaks’ director of operations.