Shein and Temu ‘Will Not Be a Significant Growth Driver for Us,’ FedEx Says
In This Article:
As FedEx maneuvers through a poor first quarter amid lingering weak volume demand worldwide and a consumer-driven shift to less profitable delivery services, demand for freight out of Asia remains one of the company’s top current strengths.
FedEx’s international economy service for packages saw a 22 percent revenue increase to $1.4 billion in the first quarter on a 35 percent volume jump—another indicator that FedEx is one of many air freight shipping companies contending with a flurry of low-value packages from overseas.
More from Sourcing Journal
-
'A Very Difficult Moment' for Retail: How Could A Change to De Minimis Impact Shippers' Costs?
-
FedEx Posts Disappointing Q1 Results; Revises Fiscal 2025 Outlook
According to chief customer officer Brie Carere, FedEx assumes there will be “continued strength” in export volume demand out of Asia for the remainder of the fiscal year. Carere said the company has “very productive relationships” with Shein and Temu, without referring to either e-commerce giant by name but calling them the “big two.”
“We’ve also been very strategic in making sure that the relationship is mutually beneficial,” Carere said during a Thursday earnings call. “What do I mean by that? Obviously, these are two massive shippers coming out of the Asia market, and we have found small opportunities to work together relative to our overall Asia business. So, we’re really happy with the relationship.”
But Carere suggested that FedEx is not looking to be reliant on the business of either Temu or Shein.
“They are accretive, but we have really focused on the parts of their business where they do need speed and/or where we have available capacity coming into the United States,” Carere said. “They will not be a significant growth driver for us and we’re not planning on that.”
As FedEx’s contract with the U.S. Postal Service (USPS) ends on Sept. 29, the company continues to overhaul its global air network to increase network flexibility, cut costs and grow in more profitable markets.
As part of this “Tricolor” redesign, FedEx is expecting to reduce its daytime flight hours by approximately 60 percent, with most of that reduction taking place in October.
Despite the fewer flights, FedEx could benefit from more air freight volumes if an East and Gulf Coast port strike takes place starting Oct. 1.
“My experience is anytime you have some port disruption, it generally favors air freight so we’ll be watching that closely,” said chief financial officer John Dietrich.
The parcel delivery firm is still making every effort to cut spending in efforts to reach its $4 billion consolidation goal by the end of fiscal 2025.