FedEx wants to tap into Australia Post fatigue - more and more competition.

http://www.news.com.au/finance/business/other-industries/fedex-wants-to-tap-into-australia-post-fatigue/news-story/c66fb7e6bdab9bd9da2bfb021ca38f88



FedEx wants to tap into Australia Post fatigue

July 5, 20168:05am

AUSTRALIA Post could learn a thing or two from FedEx.

The global parcel delivery giant has big plans for Australia, and it’s hoping the widespread dissatisfaction with Australia Post and its parcel delivery arm Star Track Express will send a bit of business its way.
While the overlap is small — FedEx only handles international shipping — new initiatives like the Australia-first ‘My FedEx Delivery’ service aim to capitalise on the widespread feeling that most of the time, Australia Post can’t actually be bothered delivering things.


According to the Postal Industry Ombudsman, complaints about Australia Post have almost trebled since 2008, largely relating to loss and delivery issues.
MyFedEx Delivery allows customers to leave their phone number so they can be contacted before a package arrives, with the option of changing the delivery date, location, or leaving specific instructions for the driver.
“The difference between Australia Post and us is we do three delivery attempts — whereas most of the time they just leave a slip,” FedEx Australia managing director Kim Garner told news.com.au.

Mr Garner said it would soon be expanding into evening delivery.
“We pride ourselves on our service culture and our money-back guarantee,” he said. “If we miss the delivery you get your money back. [Founder] Fred [Smith] put in that service culture and everyone still lives by it today.”

FedEx does partner with Australia Post for its ecommerce deliveries, where customers are comfortable with their low value shipments being delivered without signature. In those cases FedEx still tracks the parcel, however, despite using Australia Post as the physical deliverer.

FedEx, which connects overnight to 21 major cities in Asia, runs 12 flights a week, with the planes coming into Australia from the US and then out to the regional hub Guangzhou. Its fleet of 223 trucks and vans services all of the capital cities as well as Newcastle and Wollongong.

The new service, which started at the end of last year after a successful pilot trial in Sydney, is centred around getting things delivered on the “first attempt”.

Due to the guaranteed-delivery business model, which critics said was “crazy” when Fred Smith first launched the business in 1971, if the package doesn’t make it, it’s bad for FedEx as well as the customer.

“There’s a famous story of a FedEx courier who was delivering emergency medical equipment, who came to a flooded river — so he hired a helicopter,” Mr Garner said. “He didn’t get fired, he’s still with us today.”

Despite the decline in the dollar, the growth of ecommerce and the generally cheaper prices of overseas competitors means there is still a big opportunity for FedEx to cash in.

Around 30 per cent of its revenue now comes from its premium overnight delivery service, with a slightly longer “economy” version, rolled out during the GFC, has grown to about 35 per cent of its business.

While you might expect FedEx deliveries to be limited to small, high-value items, Mr Garner says “you’d be surprised” — some shoppers will overnight courier a $5 item from ASOS. “The ability to buy something from anywhere in the world and get it quickly is a thrilling change,” he said.

The $3.9 billion courier pick-up and delivery sector, which excludes Australia Post and Star Track, is highly competitive and fragmented. Its ability to compete against the postal services industry strongly determines revenue growth, according to IBISWorld.

Toll Holdings, now owned by Japan Post, is the biggest player with a market share of 12 per cent, followed by DHL which holds 9.3 per cent. FedEx has about five per cent of the market, but its acquisition of rival TNT, announced last year, is expected to bring that to 10 per cent.

Toll’s revenue in 2016 was $469.5 million, according to IBISWorld, while DHL made $363 million. While the likes of UPS and FedEx only have a small share of the local market, “they are more influential than their share of revenue suggests”, IBISWorld analyst Lauren Magner writes.

“Foreign owned firms bring with them global best practice in terms of technology and systems. They also offer valuable access to global networks, facilitating international shipments.”

Australia Post has recently signed joint venture agreements with global shipping companies including Dubai-based company Aramex and China Post, giving it greater access to the rapidly growing Asian markets.

That will no doubt make things more difficult for FedEx, which is trying to position itself locally as a premium partner for small and medium businesses to access overseas markets, particularly China.

“As the dollar has come down you see imports dropping off, but exporters have become more competitive,” Mr Garner said. “For SMEs, we are the bridge that connects them to the world. Customs laws are our specialty.”

Australia’s ecommerce market is worth around $20 billion, of which Australia Post has around $3.5 billion. Globally ecommerce is worth around $2 trillion, half of which is based in Asia.

Last month, FedEx posted a fourth-quarter loss of $US70 million ($93.8 million), largely due to large pension and acquisition items, and the delivery giant gave a cautious outlook for the next 12 months.

The results still beat Wall Street expectations, as FedEx and other delivery companies continue to benefit from the growth in online shopping.

At times, however, the boom in ecommerce has strained the networks of FedEx and UPS. To keep up, FedEx plans capital spending of $US5.1 billion in the new fiscal year. FedEx said it would use the money to expand its ground network and buy more aircraft.

FedEx recently emerged victorious in a long-running trial brought by US authorities which alleged the company had knowingly delivered illegal drugs to dealers and addicts. The trial, nearly two years in the making, was unexpectedly dropped by prosecutors just days after it began.

frank.chung@news.com.au