FedEx experienced a challenging year in 2014, with poor holiday performance, an overwhelming increase of e-commerce shipments and the decrease in fuel surcharge revenue combining to stunt margin growth.
However, the company invested more resources in the 2014 holiday season, resulting in an impressive 99 percent on-time delivery rate on Dec. 22nd and 23rd. This, combined with a change in the pricing mechanism — FedEx Ground packages will now be charged using dimensional weight pricing — should help the business get back on track in 2015.
Industry experts are predicting that the new dimensional weight pricing system will be effective in improving FedEx's revenue and margins, because it allows the company to charge a fair price for space in its trucks.
With the growing popularity of free shipping, more consumers are buying products online that they used to buy in brick-and-mortar stores. For instance, tiny products like cosmetics and toiletries are now encased in packaging materials and large boxes, weighing next to nothing yet taking up large spaces on shipping pallets. Retail professionals have dubbed this phenomenon "the Amazon effect."
"Some of these carriers are basically shipping around air," Christoph Stehmann, president of Ecommerce and Shipping Solutions, told CNBC News. "If the carrier only charged by weight, they would be losing money."
The company's new method of charging by package dimensions is expected to drive growth in the new year.
If your business requires shipping, contact Reliable Runners for help figuring out the most efficient plan for your customers' needs. A third-party logistics company like ours has the benefit of specializing exclusively in deliveries, allowing us to provide the best service for your business.