WMT Walmart Inc

By Paul Ziobro 

FedEx Corp. will deliver packages seven days a week starting next year, adding an extra operating day to accommodate America's online shopping habits.

The delivery giant also plans to bring to customers' doorsteps many of the packages it currently drops at local post offices. The shift will seek to lower costs by building density along FedEx Ground routes, while also shifting some two million packages daily out of the U.S. Postal Service's network.

The changes aim to serve an e-commerce shopping market where consumer habits don't mesh with working schedules, because many deliveries arrive at homes while shoppers are at work. It also adds capacity to FedEx's network by using existing facilities an extra day to handle what the company expects will be a doubling of small package shipments in the U.S. by 2026.

"Online shopping is seven days a week," FedEx President and Chief Operating Officer Raj Subramaniam said in an interview. "So there is increasing demand from online shoppers and e-commerce shippers for seven-day service."

FedEx and rival United Parcel Service Inc. have invested heavily in recent years to manage the surge in e-commerce packages moving through their sorting facilities and long-haul networks. Until recently, the companies have taken steps to outsource the so-called last-mile delivery to the Postal Service or others, worried that home deliveries would be less profitable than shipments between businesses. But as the volumes climb -- to an estimated 50 million domestic packages a day -- the companies are adjusting their operations to capture market share and handle weekend deliveries.

At the same time, FedEx's traditional Express business of rushing deliveries by jet across the country or globe has slowed. Amazon.com Inc., Walmart Inc. and many other retailers have expanded their warehouse networks, adding locations near more U.S. cities where they can store goods and ship them shorter distances.

Retailers are also building out their own local delivery efforts or pushing shoppers to pick up web purchases at their stores. Target Corp. acquired Shipt, a service that uses contractors to bring orders from stores, and Amazon has been recruiting people to start local firms that would carry packages the last mile from its warehouses to homes.

"FedEx could have been on the cusp of just being ignored, not having delivery options for Sundays," said Charles Dimov, vice president of marketing at OrderDynamics Corp., which sells order-management software.

FedEx plans to shift to seven-day-a-week operations in January for a majority of the U.S. population, following the holiday shopping season -- when it typically delivers packages every day to handle the seasonal surge.

The added day wasn't made with any one retailer in mind, Mr. Subramaniam said, as FedEx expects to deliver packages on Sundays for everyone from smaller shippers to the largest retailers. "E-commerce is much larger than any one company," he said.

The company didn't disclose the financial impact of its plan. FedEx said it won't charge extra fees for Sunday delivery. It currently provides Saturday delivery for no additional charge.

Mr. Subramaniam declined to say whether FedEx plans to add staff to run Sunday operations. The company uses independent contractors to handle Ground deliveries in the U.S.

FedEx this year shifted to six-day-a-week delivery operations after the recent holiday season, an expansion that has added significant costs. In March, the company cut its profit outlook for the year, citing declining revenue in its Express unit and higher costs in the Ground operations. It has switched CEOs at the Express unit twice in the past year.

Rival UPS in recent years has shifted to six-day-a-week delivery. During last year's contract bargaining with unionized workers, UPS added lower-tier pay for delivery drivers to work on weekends, although it doesn't currently deliver on Sundays.

UPS spokesman Glenn Zaccara said the company is "constantly assessing when it makes sense to expand current capabilities and operations."

The U.S. Postal Service, meanwhile, is considering expanding package delivery to seven days a week. It currently delivers packages on Sundays for Amazon year round and for other shippers during the holidays.

A USPS spokesman declined to comment.

To build density along routes, FedEx will keep more of the FedEx SmartPost packages it gives to the Postal Service. In recent years, FedEx has used technology to keep such packages in its network if a FedEx driver was headed to a nearby address.

Currently, about 20% of SmartPost packages are delivered by FedEx instead of the Postal Service. By the end of 2020, FedEx expects the vast majority of these packages to be integrated into its network.

UPS, which has a similar service called SurePost, has been redirecting packages from the Postal Service for about five years to try to find the most cost-effective way to deliver packages. "We are constantly optimizing based on the most efficient delivery method," Mr. Zaccara said.

Write to Paul Ziobro at Paul.Ziobro@wsj.com

(END) Dow Jones Newswires

May 30, 2019 15:28 ET (19:28 GMT)

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