In September 2004, FedEx acquired parcel consolidator company Parcel Direct in an effort to grow their reach. Shortly after, they rebranded it FedEx SmartPost and the new service went on to serve customers for just over 14 years. During its time, FedEx SmartPost connected shippers with customers through last mile delivery with the United States Postal Office, saving both FedEx and the shippers themselves time and money through the efficient practice.
However, as the internet and online shopping grew in popularity, FedEx began to back off on its use of its SmartPost service beginning at the end of 2019. Since then, the company has rebranded and restructured the service again as FedEx Ground Economy Shipping. In this article, we’ll discuss what FedEx SmartPost is, why it may have been abandoned, and how the parcel carrier now leans on Ground Economy instead.
What is FedEx SmartPost?
FedEx SmartPost was a shipping service that utilized both FedEx’s ground shipping network and the U.S. Postal Service. In this hybrid model, shippers gave parcels to FedEx in whatever way they normally did. FedEx would then transport that shipment through its trucks, warehouses, and SmartPost specific sortation hubs. Normally, the last leg of this journey was from the final warehouse to customers’ doorsteps, but–at the time–this was the most expensive and inefficient part of the journey for FedEx.
Instead of transporting dozens or hundreds of packages at a time, drivers would drop them off one by one. However, the U.S. Postal Service was already driving those house-by-house routes every day. Its mail carriers delivered to every address in the U.S., so why couldn’t FedEx pay USPS to complete that final leg of deliveries on its behalf? With SmartPost, FedEx delivered parcels to the post office nearest their final destination, then–usually the next day–USPS delivered them to customers.
To shippers, SmartPost often felt a lot like FedEx Ground, with both shippers’ and customers’ tracking abilities unchanged and package pickup remained the same way. SmartPost even offered a couple of advantages: shippers had access to all addresses served by USPS, some of which may not have been served by FedEx before, and there were no residential surcharges.
There were some sacrifices, however. SmartPost’s delivery time was slower than standard ground shipping by at least one day. The unified tracking offering was reliable, but was occasionally confusing to some customers who didn’t realize their shipper was using SmartPost. Additionally, once you got outside of a zip code in the continental 48 states, fees quickly piled up.
Was FedEx SmartPost a Cost Effective Solution?
In early 2019, FedEx SmartPost rates included:
- $8.23 in Zone 2 to $9.96 in Zone 8 for one-pound packages
- $15.19 in Zone 2 to $21.25 in Zone 8 for 10-pound packages
- $25.30 in Zone 2 to $56.38 in Zone 8 for 30-pound packages
FedEx SmartPost was an estimated 20% cheaper than standard FedEx ground shipping costs at the time. On the surface, that may not have appeared to be much on a single parcel, but multiplied over hundreds of packages, the 20% savings added up for many shippers across the country. However, most standard surcharges, including additional handling fees and peak season surcharges, still applied. In 2018, FedEx applied dimensional pricing to SmartPost shipments and ground shipments, but residential surcharges did not. Package minimums also applied, although they differed from other FedEx services.
It was important for shippers to remember that SmartPost rates increased in line with other FedEx rates over the years. Traditionally, base rates had risen by approximately 4.9 percent every year, with surcharges rising at a much faster pace. Shippers may have been able to save money the year they switched some parcels from Ground to SmartPost, but soon enough, costs rose again and the savings were all but negated.
How Long Were FedEx SmartPost Delivery Times?
Shortly after its introduction, shippers realized that with SmartPost savings also came longer delivery times; 1.5 days longer, on average. Shippers needed to plan for an extra two to five days more than standard ground shipping, which, in some cases, doubled transit times. Slower transit times weren’t necessarily bad or the reason FedEx eventually did away with the service, however. As long as customers knew what to expect, many shippers often found that they didn’t mind waiting a few extra days for a package that wasn’t time-sensitive. Since SmartPost offered unified tracking with FedEx, some customers appreciated the ability to track their package each step of the way.
Did FedEx Always Use the USPS for Delivery?
SmartPost typically utilized the USPS for the last leg of deliveries, also known as “last mile,” but this wasn’t always the case. In some instances, when FedEx was already near a package’s destination and direct delivery proved more easy and efficient, FedEx drivers would deliver parcels themselves. Toward the end of SmartPost’s time, FedEx also started to utilize contracted drivers and delivery services. These were package trucks that weren’t owned or managed by any one parcel carrier, but were instead independent drivers that would contract a certain amount of hours, packages, or miles with various parcel carrier companies. This new delivery option may have been the nail in the coffin for SmartPost.
How Popular Was SmartPost at FedEx?
In the early years of SmartPost, the service was heavily relied on by shippers across the contiguous United States. As the internet grew in popularity, many customers and e-commerce companies praised the service, even if the slower delivery time was a common point of discussion (and complaints) at every level of the industry. Using the USPS for last mile delivery saved everyone money, but over time, FedEx recognized that operating an entire standalone model for one service had its inefficiencies and–accordingly–unnecessary costs.
What is the Service that Replaced FedEx SmartPost?
In early 2021, FedEx announced it would be replacing SmartPost and its USPS last mile delivery service with its own internal service, rebranding it FedEx Ground Economy. The parcel shipper also mentioned that they had planned to finish this update the year prior, but the COVID-19 pandemic put their plans on pause as they–along with the rest of the world–went into lockdown. Today, that is still the service offered by FedEx instead of the now defunct SmartPost.
Why Did FedEx Scrap SmartPost?
While FedEx didn’t reveal too much about their decision to end last mile delivery with the USPS, we can gather that they were looking to drive more efficiency and volume to its legacy FedEx Ground network. By increasing the volume of deliveries with each stop with FedEx Ground, they were able to drive more profitability when compared to that same volume going through SmartPost.
Additionally, because SmartPost was a rebrand from FedEx’s Parcel Direct acquisition, the service was operating on a standalone model, with its own network and 26 warehouses and sorting hubs. By moving SmartPost packages to FedEx Ground, the company was able to start utilizing its standard shipping network instead of operating off the smaller, acquired network.
Today, FedEx says that much of their Ground Economy packages go through their own network now, but the reality is that the majority of their last mile deliveries are going through contractors instead. This shift to their legacy network and leveraging contractors has led to significantly more savings for FedEx than SmartPost generated in an average year.
If you’re a business looking at FedEx Ground Economy or looking at other ways to save money, it’s time to look into Reveel. At Reveel, we use AI and machine learning to provide an unparalleled look into what’s impacting your bottom line. Through invoice audits, peer benchmarking, and rate modeling and simulations, you can see the health of your operation and assess pricing changes from parcel carriers like FedEx and UPS. Sign up for a free Reveel account today to see how you can leverage automation to synthesize your data, ship more for less, and reduce the time needed to identify issues and action items.