The second quarter earnings of FedEx for their fiscal year 2017 have been posted but it fell short on expected profits. While it is true that the revenue of FedEx beat the target from Wall Street, underneath all the headline results, the giant shipping company is obviously challenged by the amount of packages it has to ship.
It seems that the growth of online shopping through Amazon and other online retailers has burdened FedEx with the sudden increase of direct to the customer packages. According to Mike Glenn, the executive vice president for corporate communications, the year will be closing with another significantly busy peak season for the company due to the rapid growth of online shopping. As ecommerce grows so thus the challenges faced by FedEx because there are days when volume surpasses the daily average.
According to Glenn, the volume of ground shipping has increased by 5% year-over-year for the 2nd quarter. Many consumers have shifted to online shopping during the holidays and FedEx is faced with a flood of packages that have to be sorted and shipped. To address this challenge, FedEx has increased the size of its handling operations.
In 2016, FedEx has completed 185 facility projects and 4 major distribution hubs including 19 fully automated stations and 69 relocations. The total is more than 10 million square feet of additional space for sorting. The sorting space comes at a cost which is beyond CapEx investment and includes rent, insurance and property tax for the building.
Another challenge is the labour side because in 7 to 9 markets, it is very difficult to find package handlers. At this time of the year, staffs have to be offered increased hourly pay rates and bonuses to ensure that the facilities are fully staffed. The low unemployment rate is also compounding the issue of hiring new staff.
Many consumers today prefer the convenience of ecommerce. NRL store online is prepared to serve you when there is a need for products associated to your favourite rugby teams. Shopping is very easy and efficient because you only need to click on a team. Delivery is very fast and the purchases will be with you even before you know it.