Amazon is making more and more moves from the e-commerce market into the shipping industry — and FedEx and UPS are stepping up their game.
Initially, both shipping carriers just needed to absorb Amazon’s volume, and both added additional delivery days. But in June, FedEx announced that it would not renew its FedEx Express contract with Amazon. That service level largely supported Prime’s two-day delivery promise. UPS’s relationship with Amazon persists — as does that of FedEx Ground — but these two competitors tend to imitate each other, which means UPS may soon reduce its offerings to Amazon too.
FedEx and UPS are also innovating on their own and both made the decision to expand their network. Both are investing in advanced technologies, including package delivery robots and drones. And both offer delivery to storefronts, both their own and those of commercial partners. Online shoppers can pick packages up at their convenience without worrying about security risks, and carriers save money by making one delivery instead of several. This appears to be an idea good enough for Amazon to imitate: Kohls now accepts Amazon returns at its stores nationwide.
Now, FedEx is expanding its brick-and-mortar offerings through a partnership with Dollar General, the discount chain focused on rural America. And UPS is supporting ShopRunner, an online fashion retailer, as it seeks to carve out a niche Amazon hasn’t yet claimed.
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FedEx Creates Delivery Partnership with Dollar General
In June, FedEx announced a new parcel service: a package drop-off and pick-up partnership with Dollar General.
Beginning this summer, online shoppers can pick up e-commerce orders delivered via FedEx to 1,500 Dollar General stores. This way, packages don’t have to sit on doorsteps, where they might be stolen. If customers have to sign for packages, they don’t have to stay home and wait for the delivery to arrive. The program works the other way, too: If customers want to return their e-commerce purchases, they can send them via FedEx from Dollar General stores.
FedEx hopes to expand to 8,000 Dollar General stores by the end of 2020, the company says — just like Amazon’s partnership with Kohl’s, the future of e-commerce lies in having an alternative physical location for parcel delivery and return.
The relationship will be similar to the one FedEx already has with Walgreens, Albertson’s and Kroger. But while those storefronts are primarily urban and suburban, Dollar General has placed a particular focus on rural areas. Rural deliveries are inefficient and expensive. If FedEx can deliver multiple shipments to a single Dollar General location at once, rather than driving long distances between each residence or business, the company can cut down on shipping costs like labor and fuel.
“Dollar General is the perfect retailer to help us meet the growing need for convenient, secure drop-off and pick up options in a variety of rural communities,” said Scott Harkins, senior vice president, Customer Experience Marketing, FedEx Services, in a June 17 statement. “We understand customers may not always want packages delivered to a home or office. They want secure, alternate delivery options, and we’re on a mission to make that happen. We are proud to work with Dollar General to make our customers’ lives easier.”
The company says that by the end of 2020, about 80% of Americans will live within 5 miles of a FedEx location, up from just 55% today. All told, including FedEx storefronts, dropboxes and retailer partnerships, there will be more than 62,000 FedEx shipping locations in the U.S.
UPS Establishes Shipping Partnership with ShopRunner
Also in June, UPS announced that its UPS My Choice members would receive a year of free two-day shipping and returns with ShopRunner, an e-commerce portal that sells clothing from retailers like Ann Taylor and Kate Spade New York.
UPS My Choice is Big Brown’s membership program. Customers who create a free account can receive delivery alerts, track multiple packages on a calendar, and manage deliveries by creating “leave at” instructions or sending them to neighbors or UPS Access Point locations. The paid tier gives members the option to change parcel delivery days, change delivery addresses, or upgrade UPS SurePost packages. (SurePost is UPS’s partnership with the U.S. Postal Service, where UPS delivers packages to local post offices for last-mile delivery.) UPS says it has about 58 million registered members.
Members already have access to UPS My Choice Deals, “which range from shopping discounts to cash-back offers,” the company says. Now, they will be able to purchase goods on ShopRunner and receive two-day shipping at no extra charge.
“We’re thrilled to add yet another unique value to the UPS My Choice program,” said Kevin Warren, UPS’s chief marketing officer, in a statement. “Retailers benefit by connecting to the UPS My Choice customer base, which is comprised of savvy and loyal shoppers.”
ShopRunner already offers free two-day shipping to its members. Presumably, this partnership will reduce its costs, as well as putting more of those deliveries on UPS trucks and planes. “As shoppers increasingly demand faster shipping and more control of their deliveries, we have welcomed this strategic alignment with UPS,” said Sam Yagan, CEO of ShopRunner, in a statement.
It’s worth noting that ShopRunner is an Amazon.com competitor. ShopRunner members have access to more than 100 online retailers, and the company promises free two-day shipping and free returns, just like Prime. About half of U.S. e-commerce business is now done on Amazon. The more slowly that share grows, the better for FedEx and UPS.
The ShopRunner partnership could drive thousands of people to sign up for at least the free tier of UPS My Choice. While that doesn’t directly generate revenue for UPS, it may make shoppers more aware of the option to leave shipments at UPS Access Point locations. These include about 9,000 businesses nationwide, with 80% of Americans already within five miles of one, the company says. The more deliveries UPS is able to make to those central hubs, the less distance drivers have to travel, which saves the company money.
Also, as more people sign up for My Choice and begin using it to specify their preferences, UPS generates more and more data about the delivery service customers want. As the company updates and retools its offerings for 2020 and beyond, that data will help them understand what makes a delivery service convenient, pleasant and positive for their customers. The more UPS knows, the more it can tailor service to what people really need.