Not too long ago, if you wanted to get a package somewhere there were three primary choices — FedEx, UPS and USPS. But times have changed — both customers and merchants can now choose from a range of same-day delivery offerings in addition to traditional mail carriers. Not to mention that many retailers (Amazon, Walmart, Target and American Eagle Outfitters, to name a few) have cut out the middle man and are handling the last mile themselves.
Despite this disruption to the status quo, FedEx remains a power player, delivering 15 million packages around the world every day. But that doesn’t mean that the company hasn’t had to do some soul-searching about its role in the new world of commerce.
Ryan Kelly, VP of Marketing at FedEx, refers to himself as a “supply chain geek with a contrarian streak” who loves to talk “fulfillment, returns and consumer shopping behaviors with anyone who will listen.” So, we took the 16-year company veteran at his word and asked all our burning questions about how FedEx is evolving with the times, and how merchants can fortify their supply chain operations amid these seismic supply chain shifts.
Retail TouchPoints: What are the biggest changes you’ve noted in how goods arrive at consumers’ doorsteps over the last decade, and what do these shifts mean for retailers and FedEx?
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Ryan Kelly: So many trends over the past decade — from the surge in residential delivery over commercial delivery to “free shipping” to expectations on click-to-door speeds — have truly shifted the parcel industry. Obviously, ecommerce has powered this evolution, but everybody knows that, so let me pivot to maybe some less appreciated trends.
People want — and expect — to know exactly when their packages are going to be delivered. When polled, 94% of consumers said they expect brands to tell them when their delivery will be before they even have to ask. That’s why you’ve got to leverage predictive data, using machine learning in real time, to better anticipate delivery windows. Shoppers can deal with delays, but they expect brands to keep them in the loop.
Beyond timely delivery, people are drawn more than ever toward brands that align with their values, especially when it comes to sustainability. Research shows that to Gen Z, sustainable practices are even more important than brand name. To meet this expectation specific to delivery, companies can use our predictive modeling to improve their carbon footprint reduction strategy and make smarter supply chain decisions.
Retailers have to invest in the technology that will help create customer experiences that are consistent with their brand and aligned with their customers’ expectations — their ecommerce business depends on it.
RTP: What sets FedEx apart from its competitors in this new landscape?
Kelly: I would say it’s the combination of our physical and digital networks. We’ve spent the last 50 years building our physical network to now span over 220 countries and territories, playing a pretty vital role in expanding global trade and commerce.
We’re turning all of that experience and data into digital solutions that address every stage of the customer journey. Yes, other companies attempt to add a digital layer on top of physical networks, but data without insight can end up just being noise. We know our data better than anyone and our experience provides us with the unique ability to offer the insights that others in the industry merely try to mimic.
Today, FedEx is averaging over 15 million packages per day for our small, medium and large customers — that generates one petabyte of data. To give you a visual, it would take 20 million tall cabinets to file all that information [gathered in just one day].
We’re focused on integrating new technology with our comprehensive transportation solutions and expanding our global retail network with the aim of creating a better delivery experience for merchants and shoppers. And that’s a big part of what sets us apart — we’re building the technology today that will make supply chains smarter and more resilient tomorrow.
RTP: Many new logistics solutions have emerged in recent years. How has the company’s strategy shifted to accommodate this new landscape?
Kelly: What we’ve seen is a lot of partial solutions that serve a niche, but ultimately merchants need a holistic solution to meet all their needs — from commercial delivery to residential delivery; from fast to economical; from local to global. We feel great about our broad, robust product portfolio.
[Our new] fdx platform [the company’s data-driven commerce solution] helps make supply chains smarter. What initially started as some solutions that helped increase demand for merchants’ products and improve the returns experience has evolved into a platform that solves discrete problems like knowing when a product will be delivered before it’s even been ordered. It also addresses more interconnected opportunities, like fulfillment optimization that incorporates environmental impact and network disruptions caused by weather while still meeting consumer click-to-door expectations.
RTP: Research shows that many retailers are still concerned about the product shortages of the pandemic and as a result are holding a significant amount of surplus inventory, which of course comes at a financial cost. What tools or tactics are you seeing actually work to help retailers better forecast the movement of goods and minimize financial risk?
Kelly: We’ve been a longstanding partner for retailers and millions of businesses of all sizes. From what we’ve seen, most of these brands still have to use fragmented and inefficient shipping solutions across multiple platforms. Having a single, end-to-end solution that provides visibility into every stage of the consumer journey, from demand to returns, is a game changer, and it’s what we’re building with the fdx platform. Plus, having a streamlined post-purchase experience empowers consumers to buy with confidence and ensures inventory is back on the shelf more quickly and efficiently.
Think about it this way — let’s say a shoe retailer has a 22% return rate and 87% of returns can go straight back into stock as new. How does that impact your inventory planning? Now, what does it mean if your click-to-door-back-to-stock is five days versus 25 days? This isn’t just a delivery thing, or an inventory thing; it’s a fundamental business thing that impacts working capital.
With the fdx platform, we’re combining our global network with the power of AI and machine learning to turn insights into real-time intelligence for FedEx merchants. This intelligence helps merchants give their customer the best visibility into their shipment, which improves the customer experience while inspiring brand loyalty and repeat purchases. The ability to not only be proactive, but predictive, helps retailers better manage their inventory and drives down costs.
RTP: What do you see as the biggest logistics challenges facing retailers today?
Kelly: The last mile of delivery is often the most expensive mile because the supply chain gets less efficient as it trends toward a single package and gets closer to the end recipient. That’s why residential and rural surcharges exist, as they are fundamentally more costly deliveries to make. Balance that with consumer expectations for free and fast and you can understand the challenge that retailers are facing.
It’s like a late night informercial: “But wait…there’s more!” because [all of that] gets even more expensive when it’s a return. And as ecommerce continues to grow, so does the demand for returns. Merchants hate dealing with returns, but consumers overwhelmingly love the option. And it’s not just the speed of returns, but the flexibility for shoppers to make returns when and how they want.
It’s become somewhat of a catch-22 for retailers, but an online brand’s return policy can truly be make or break. In fact, 96% of consumers would shop again with a brand that has an easy returns policy. Retailers don’t necessarily want to encourage returns, but they know that facilitating an easy, convenient return process is essential.
Retailers should view [returns] as an investment, especially online brands with less name recognition. We’ve all been on Instagram and seen something we want to buy but have never heard of the brand. A solid returns policy helps build trust in the brand and reduce the hurdle to cart conversion as an online retailer.
RTP: What steps do you recommend retailers take to fortify their logistics operations for the future?
Kelly: I’d say the first step is to look upstream from their logistics operations. To truly prepare for the future, a business needs to fundamentally understand how things such as their brand promise, their return policy and even their fraud-preventing technology impacts their supply chain. Once you understand the whole ecosystem, then you have to ask yourself whether you have the technology to holistically view your business with all of its interconnectedness. One step beyond that is, can you even execute on the insight you now have into your business?
I’m often baffled by the lack of understanding on profitability by sales channel and lifetime value of an individual customer. When a merchant doesn’t have the ability to truly look beyond just revenue or some intermediate level of profitability, it can drive poor decision-making in all of their operations, from logistics and customer service and even to upstream marketing promotions.
