Triad consumers may be the beneficiaries of heightened competition between Amazon and FedEx Corp. involving their “last mile” residential delivery services.
FedEx has chosen the Triad for the March debut of its first last-mile service in the nation as the company adjusts its operations to increase efficiency and lower costs.
Under the last-mile initiative, FedEx Express will contract with FedEx Ground to deliver certain time-sensitive Express shipments to residences and businesses.
The service will operate out of its 483,000-square-foot FedEx Ground facility in Kernersville that opened in 2011 and was expanded in 2013.
Amazon opened its first Triad delivery station in October 2019 in a 66,000-square-foot building at 7929 National Service Road just west of the Greensboro city limits with “hundreds of part- and full-time” workers already in place. (The property has a Colfax address but is in the High Point city limits.)
Those jobs pay between $18 and $25 an hour with flexible work hours daily. For more information, go to https://flex.amazon.com.
In July 2019, FedEx Corp. announced that it would no longer make ground deliveries for Amazon as the e-retailer ramped up its Flex program, under which Amazon hires delivery drivers on demand, similar to a ride-hailing service.
FedEx said its goal is to expand its last-mile service in phases nationally this year.
“This move makes residential deliveries more efficient by putting the right package in the right network at the right cost to serve our customers,” Raj Subramaniam, FedEx’s president and chief operating officer, said in a statement.
“This change leverages the strengths and investments in the FedEx Ground network, making it the network of choice for residential packages fueled by e-commerce,” Subramaniam said.
FedEx said the last-mile initiative builds upon its expansion of large-package handling for such items as TVs and furniture that consumers are increasingly ordering online.
FedEx said the shift “will help improve safety and sustainability by reducing the number of delivery vehicles in neighborhoods.”
Driving personal vehicles
Once Amazon severed its delivery contract with FedEx, it ordered 20,000 diesel Mercedes-Benz vans for its Amazon delivery service partners program.
Amazon’s local last-mile service utilizes those Amazon delivery vans or has drivers use their personal vehicles.
The delivery station is not directly connected to the Amazon Prime Now one-day delivery program, a spokeswoman for Amazon said, but “does help with delivering products as quickly as possible to customers.”
Still, according to Supply Chain Drive, about 62% of Amazon’s packages in 2019 were delivered by U.S. Postal Service and 21% by UPS.
Critics of Amazon’s last-mile delivery strategy say it doesn’t operate as efficiently as it could to limit its environmental impact because of limitations built into its business model.
As long as Amazon Prime customers receive free shipping for individual items, there’s no incentive to make multiple orders at one time. If customers did place multiple orders, the products likely would come from different fulfillment centers to the delivery station.
“Companies like Amazon don’t want consumers to make that connection — it messes up their business model,” Beth Davis-Sramek, a business-school professor at Auburn University, told Supply Chain Drive, a trade publication.
“You can run more fuel-efficient modes of transportation, create more efficiency and reroute schedules to minimize the number of miles,” Davis-Sramek said. “That doesn’t mitigate the total footprint of everything involved with making that delivery happen.”
Triad an important market
Supply Chain Drive said that “while carriers try to decrease the miles driven and time on the road, retailers look at the deliveries from a different vantage point.”
“Their goal is to increase profits while pleasing customers with on-time delivery. Add in consumers, who often claim they care about the environment yet continue to place online orders without considering the environmental impact of their actions,” the magazine said.
Roger Beahm, the executive director of the Center for Retail Innovation at the Wake Forest University School of Business in Winston-Salem, said that “whether the product is apparel, household goods, business products or supplies or even groceries, ‘how’ and ‘when’ a shopper’s order is delivered, as well as how much that delivery costs, has become a key part of the decision to buy.”
Beahm said there will continue to be increasing competition to own that last mile between the seller and the buyer.
“The Triad has become an important market for Amazon, to learn what works and doesn’t work in the home and business delivery areas,” he said. “It’s part of Amazon’s value to its shoppers.
“With a FedEx hub located here as well, one would expect FedEx to be more aggressive in finding new markets for its delivery services as well. And it knows if it doesn’t, Amazon will.”
“Amazon has shown it is willing to be aggressive and own every step of this process,” Beahm said. “While Amazon may not be perceived as being in the delivery business, it clearly is. Controlling the delivery of its customers’ orders helps Amazon ensure the quality of the customer shopping experience.”
Beahm said FedEx, like Walmart before it, has realized it must compete head-on with Amazon for consumer spending.
“That includes the home delivery aspect of shopper behavior,” he said. “Like Walmart, they are now having to play defense as much as offense.”
Beahm said FedEx’s last-mile service could prove attractive to retailers wanting to compete with Amazon or who want to have another quick-delivery option similar to Amazon Prime.
“For FedEx, there is opportunity to expand into new delivery categories long term,” he said. “Today’s online shopper can find and order — for home or office delivery — literally anything.
“Every online order that’s not picked up means a market opportunity for a delivery service. This is evidenced by the number of food specialty delivery services that have emerged.”
Although Beahm said that delivery “is just one part of the value proposition, for some products, many retailers and most consumers, it’s an important and growing part.”
“If a company like FedEx could offer a superior delivery benefit (e.g., faster home delivery, which just happens to be consistent with the company’s original guaranteed-overnight-delivery proposition, then a number of brick-and-mortar retailers might well look to a company like FedEx to help carry their products across that last mile.
“Remember, most retailers would rather just be in the retail business, not in the delivery service business,” Beahm said.
“If you take this growing need for a dependable rapid-home-delivery service, and combine it with a provider like FedEx who wants to meet those needs, you’re setting up a win-win.”