- Last week, we wrote about FedEx’s negative 2Q22 pre-announcement; this week, FedEx gave their full 2Q22 update where management shared more, including, "within the domestic performance is that from a FedEx Ground economy perspective, we have prioritized revenue quality and so we have let some volume go. That was very conscious, and we have seen that kind of persist throughout the quarter."
- Foregoing lower yielding volume to USPS and other delivery providers is similar to what UPS has done over the past three years (prioritizing revenue quality over volume, thus driving ROIC higher). The result of that shift in delivery is that certain brands (be they B2B or B2C) are willing to forego delivery speeds and service levels to obtain a lower delivery cost. Not coincidentally, FedEx announced a record high +7% price increase for 2023. In total, this adds friction and higher costs to B2C brands/goods via e-commerce, on the margin, and tips the advantage towards physical retail – one of the big themes we've identified this past year.
