E-Commerce to Generate 88% of US Parcel Growth in 2022: FedEx

FedEx expects the U.S. domestic parcel market to surpass 107 million packages a day in calendar 2022, with e-commerce “contributing 88% of total U.S. market growth,” said Chief Marketing and Communication Officer Brie Carere on an earnings call Thursday for fiscal Q4 and 2021 ended May 31. Excluding Amazon volume, the U.S. domestic parcel market is expected to be 72 million packages a day in calendar 2022, she said. “We forecast that the U.S. domestic parcel market will reach 172 million packages a day in calendar year 2026.”

Fiscal 2021 parcel volume was very strong across the FedEx “portfolio of e-commerce solutions,” said Carere. Average daily volume grew across all FedEx segments, with the U.S. small and medium business sector leading with 32% year-over-year growth, she said. E-commerce also drove 28% year-over-year growth in the FedEx returns business through April, said Carere. “As more consumers shopped online, enrolled FedEx delivery manager users grew by 43% year over year.”

U.S. residential package volume was 67% of the FedEx “mix” in fiscal 2021, compared with 62% a year earlier, said Carere. “We expect residential volumes to grow significantly faster than commercial volume” this fiscal year, but “solid” business-to-business growth also is expected because customer inventories are “at historic lows,” she said.

Industry supply chain constraints are “real,” driving inventory-to-sales ratios to “an all-time low,” said President-Chief Operating Officer Raj Subramaniam. If the inventory trend continues, “that drives a lot of express traffic,” he said. The “intensity” of customer demand “has not abated,” said FedEx Express CEO Don Colleran. Of the “historically low” inventory crisis, “not only is it finished product, but it’s raw materials, i.e. chips and other things that are going into finished products,” he said. “The demand cycle that we’re seeing, both domestically and internationally, continues to be extremely strong.”

Global trade volume “has surpassed pre-pandemic levels and is on course for its fastest year of growth in over a decade,” though air cargo capacity will remain “constrained” through at least the first half of calendar 2022, said Carere. “Recovery will be slow, potentially episodic, and a full recovery is not anticipated until 2024.” FedEx in fiscal 2021 grew e-commerce parcel volume by more than $1 billion year over year out of Asia and Europe, she said.

Demand for exports from Asia has “recovered” globally to pre-COVID-19 levels, said Carere. FedEx “network plans” for fiscal 2022 include running six intercontinental daily flights from Asia “to provide more consistent, predictable capacity based on our demand forecast,” she said. “This will eliminate some of the ad hoc nature of our flights” in fiscal 2021, she said.