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CYBER-SOCIETY-LIVE  2000

CYBER-SOCIETY-LIVE 2000

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Subject:

[CSL] FedEx slows down to move at Internet speed

From:

John Armitage <[log in to unmask]>

Reply-To:

[log in to unmask]

Date:

Fri, 30 Jun 2000 08:31:57 +0100

Content-Type:

text/plain

Parts/Attachments:

Parts/Attachments

text/plain (107 lines)

FedEx slows down to move at Internet speed 

By Sandeep Junnarkar
Staff Writer, CNET News.com
June 29, 2000, 12:15 p.m. PT
URL: http://news.cnet.com/news/0-1007-200-2174124.html 

Federal Express, the speedy overnight-delivery giant, has quietly introduced
a slower home-delivery service catering especially to the
needs of Internet shoppers. 

FedEx launched its Home Delivery service in March in major metro markets
including New York, Chicago, Los Angeles and Dallas
after realizing that e-shoppers were choosing lower-cost delivery options
after ordering goods online. 

"The growth of e-commerce has influenced our thinking and made it imperative
for us to offer this service," said Rodger Marticke,
FedEx Ground's executive vice president. 

The new service allows customers to set up deliveries by appointments,
evening drop-offs or specific dates. 

Delivery companies such as United Parcel Services (UPS), FedEx and even the
United States Postal Service have increasingly
hitched their fortunes to the e-commerce explosion. The need to bring a
product purchased on the Web into the buyer's home has
given their revenues a tremendous boost. 

Their success has also created a whole new generation of delivery services,
such as Kozmo.com and DNet, which promise to deliver
products within one hour after a consumer makes a purchase. 

Even companies that began as Web grocers quickly realized that their
strength lay in their network of delivery vans. Companies like
Webvan have expanded from being grocers to delivering books and consumer
electronics. 

But FedEx, which made its name with speedy service in the business world,
found itself in the awkward position of moving a bit too
fast for the Internet. Shipping a five-pound package overnight from New York
to San Francisco costs about $35; second-day service
costs about $16. 

The new home-delivery service for the same package is about $6.50--add
another $30 for appointment services, $10 for evening
drop-off, and $5 for a specific-day delivery. 

In the three months since FedEx began offering the service, Marticke said
the company has picked up more than 1,000 clients,
including drugstore PlanetRx and Omaha Steaks, an online meat retailer. 

"That is ahead of our expectations," Marticke said, adding that the company
is adding new businesses daily. 

As FedEx expands the availability of the service beyond major markets, the
company said it plans a major advertising campaign for
the largely unknown service. 

New convenience
With the launch of the service, online shoppers have a wider range of
delivery options--from instant gratification with one-hour
delivery, to seven-day service from UPS, to deliveries by appointment. 

"This is what customers have been asking for all along, even from their
utility companies and furniture-delivery people who tell them,
'We'll be there between 1 and 5,'" said Chris Newton, an analyst at AMR
Research. "That just doesn't cut it with
people's schedules these days." 

But FedEx faces the same problems that other companies confront when making
stops in residential areas: How
do you avoid sending one truck to one home in a single town? 

"The challenge is to maintain enough density in their delivery areas at
these time-specific deliveries to make it a profitable
operation," Newton said. Unlike repeat deliveries at businesses, residential
drop-offs are few and far between. 

"That challenge has historically confronted home-delivery services," said
Marticke, adding that the service will use FedEx's
delivery-routing technology and infrastructure, which has been repeatedly
streamlined since the company's birth. 

"We are committed to operating all of our businesses, including home
delivery, at an acceptable profit margin," Marticke said. "We
are not looking at it in any way as a loss leader or a defensive strategy
where we're willing to absorb the costs." 

The wider spectrum of delivery options is critical to sustain the growth of
e-commerce, analysts said. 

"The ability to customize shipping options allows a site to compete more
effectively not only with other commerce sites but
increasingly with their offline competitors," said Michael May, an analyst
at Jupiter Communications. 

For instance, a consumer who may have been reluctant to buy an $800 watch
online may find it more reassuring to make such a
large purchase if he or she can schedule an exact time to accept the
delivery. 




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