FedEx Sees Growth From E-Commerce, TNT Integration

Online shopping hasn’t helped retailers with significant brick-and-mortar footprints navigate the way consumers buy these days—the latest example: Toys”R”Us—but it’s certainly been a boon to the delivery service industry.

FedEx and rivals are soaring, posting significant growth in business due to e-commerce orders. As FOX Business notes, “The parcel delivery giants are handling the influx of online orders, and they have invested heavily in their networks to reduce delivery times,” especially before the critical fourth quarter with its holiday shopping frenzy and Cyber Monday sales.

Expect the fourth quarter of 2017 to bring red-letter days again for FedEx, the pioneering package delivery brand. Or make that purple-and-orange days. Standardizing its corporate branding in the familiar purple and orange colors over the past year has been a critical step for FedEx to prepare for the growth it’s experiencing in the digital and mobile shopping era—and as a result of its merger with TNT.

FedEx in the past year consolidated the look of its logo into a consistent color scheme across its many business divisions. Its research showed that purple and orange was one of the most recognized representations of the logo by consumers, though the company used several other color combinations across its varied businesses.

As Adweek noted, “The purple and orange combination was previously used on FedEx’s Express and Supply Chain logos and will now run on all of its business division logos, including FedEx Corp., Services, Office, Ground and Freight. FedEx Corp.’s logo will change from purple and gray to purple and orange, for example, while FedEx Ground will say goodbye to its purple and green color scheme.”

“For more than 43 years, the logo has built up equity for our brand, on packaging, aircraft and drop boxes,” Patrick Fitzgerald, FedEx senior vice president of marketing, told Adweek. “As we grow and expand, we’ve recognized that there’s one FedEx brand in the world, and we want to make sure we maximize its value and simplify it for customers. The time was right to make a change.”

The brand also maintains a huge philanthropic commitment, and earlier this year FedEx was recognized by the Points of Light foundation as one of the most community-minded companies in the United States.

The E-Commerce Effect

FedEx is leaving nothing to chance as it battles rivals for business resulting from the e-commerce boom. It’s also challenged by the flurry of delivery services, including Amazon testing its own delivery fleet.

As EVP, Chief Marketing & Communications Officer Rajesh Subramaniam noted on its latest earnings call, “preparation is underway for the 2017 peak holiday shipping season. The expectation is for another record peak season with multiple days that’ll set records for package pickup and delivery. We continue to work directly with relatively small number of large customers that drive the majority of the surge and demand to ensure that we have appropriate pricing related to volume expectations and capacity needs.”

What’s more, “We also continue to experience growth in demand for large, heavy package delivery as a growing array of items are now being sold online. Furniture, mattresses, sports and exercise equipment are increasingly moving to the FedEx Ground network for residential delivery.”

For example, FedEx is expanding the number of bricks-and-mortar outlets for its services, such as last year’s deal to make FedEx available at more than 1,500 Office Depot locations, expanding a deal FedEx already had with the sibling chain OfficeMax.

Integrating TNT

Another major factor shaping the brand’s growth is the integration of TNT with FedEx Express, as President and COO David Bronczek explained on its most recent earnings call:

“At $4.9 billion, the TNT acquisition is the largest in FedEx history, and we are working to combine the TNT group, which includes 54,000 employees, their operations across 200 countries and more than 1 million shipments daily within FedEx Express. The momentum from our progress in FY ’17 has produced tremendous excitement within our teams, and we are focused on delivering the opportunities and the benefits provided by this combination.

The acquisition of TNT provides extensive benefits to FedEx, including rapidly accelerating our European and global growth, substantially enhancing our global footprint by leveraging TNT’s low-cost road networks in Europe, in the Middle East and in Asia and expanding, of course, our customer capabilities and solutions.

The integration is a key driver of the FedEx Express FY ’20 operating income improvement target of $1.2 billion to $1.5 billion. Integration synergies will be realized through an optimized pick-up and delivery operation, the operation of integrated global Express networks, improvement in the efficiency of staff functions and of course, revenue growth.

Collectively, these factors position us to deliver unmatched service for our combined customers, significantly improve our cost and overall, offer a best-in-class portfolio of services focused on improved market share, improved yields and of course, improved profitability.

I would like to take a few moments to highlight the exceptional progress we have made in FY ’17. We successfully integrated 64 countries around the world in FY ’17. And beyond these 64 countries, 5 additional significant countries are underway as we speak, including Canada, Japan, Spain, the United Arab Emirates and the United States. Our integration in the United States and Canada will be complete this month, and the remaining 3 will be finished in the first half of FY ’18.

In April, one of the first tangible and very important steps in connecting the FedEx Express and TNT world networks was realized with the successful launch of our new Boeing 777 FedEx flight from TNT’s hub in Belgium to the FedEx world hub in Memphis.

This new flight brings benefits to approximately 100,000 existing TNT customers around the globe by providing access to the robust FedEx network in the United States and Canada with improved transit times, broader service coverage and much higher weight capabilities.

We’ve also delivered key back-office initiatives in FY ’17, particularly in the IT environment. Two of these are critical. We put both of these operations in, in the fourth quarter. These include technology to provide ability to handle FedEx Express packages in the TNT network and TNT packages in the FedEx network and technology that allows the management of customer inquiries across the world to use the same common service platform. Each of these IT initiatives significantly benefit our customers and of course, our employees. All of these accomplishments were made possible by our outstanding team.

And on the people side, our leadership teams are in place, and we continue to benefit from the TNT personnel. As of this past June 1, 40% of our integrated international officer and director positions are now in place, and 40% of them are TNT executives. We have outstanding leadership in place to drive the integration.

In addition, our work in FY ’17 has produced key learnings that will leverage our FY ’18 as we focus our efforts on more complex but much, much higher-value countries being integrated around the globe. We learn valuable lessons in FY ’17 that can be applied to the upcoming countries in FY ’18 and beyond.

The execution of our FY ’18 integration work is in full swing now, and during the fourth quarter, we launched integration activities across many additional countries, including many of our largest direct-serve businesses, particularly in Europe. Our focus for country integration in FY ’18 will turn to more complex but much higher-value markets.

These countries represent significant value as they represent approximately 80% of our revenue and 80% of our employees within Europe. FY ’17 has been very productive for us in this complex multi-year integration. We are pleased with the progress that we have made and are extremely excited about the next steps in FY ’18 as we continue to bring these two fantastic businesses together.”

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