FedEx's eCommerce Overhaul, Walmart's Legal Battle, & The Micro-Influencer Revolution

Good Morning,

First, as always, thank you for joining.

Happy 2025 to all of you logistics and retail leaders out there.

It’s going to be a wild year and this edition is a BEAST to get the year started.

I’ve got some cool news coming out on Tuesdays - I hope you are able to watch the LinkedIn feed for it.

Also, Matt and I are BACK with Wake Up and Deliver on Monday morning - it’s our first show of 2025 and the first after taking a few weeks off for the holidays. We’ll be rocking and we hope to see you there.

Here’s what this issue brings:

• With FedEx holding their Q2 2025 Earnings call on Dec 19, 2024, I’m giving you a primer of their current state and the 2025 strategy they are using in the market.
  
  This article is a response to many questions I have got from different parts of the community looking for more understanding of what FedEx is doing and why they are so aggressively chasing business they (not that long ago) didn’t seem to want
  

• The U.S. Consumer Financial Protection Bureau says Walmart cost its Spark Delivery drivers more than $10M and they’ve filed a lawsuit to get it settled
  

• How important are micro-influencers and what’s their ROI? Brands and service providers both need to jump into the deep end in 2025

From Industries To Consumers: FedEx’s New Plan To Take More Of eCommerce

FedEx is changing how it works.

Its B2B business which once drove premium value has been declining for years. With eCommerce continuing to dominate shipping, FedEx knows that they need to be top of mind for shippers.

Here's what FedEx is doing, why it's doing it, and what it means for everyone.

New Market, New Rules

B2B has been FedEx’s bread and butter.

It allowed for higher margins and more operational efficiency.

But direct to consumer eCommerce has changed the game. B2C shipments are what’s growing.

Fast.

Even though these shipments come with fewer packages per stop and higher costs to deliver, everyone wants in.

Competitors like Amazon, Walmart, and smaller carriers have all been pushing hard to grab market share, selling on discount or over-promising on service.

FedEx’s recent Q2 2025 results (Dec. 19) showed pressure in its B2B business, with a 1% YoY decline being attributed to weak industrial demand.

But B2C continues to expand.

FedEx knows that to stay in the game, it needs to scale B2C operations, winning back business they’ve lost to new platforms and regions over the last few years (all while holding onto the B2B business).

The problem is that eCommerce volume comes with a host of challenges.

B2B shipments (often) involve predictable schedules, consolidated loads, and fewer delivery stops - basically better density per mile.

B2C on the other hand, requires handling a MASSIVE number of small packages, most of which go directly to customers’ doorsteps one at a time. Add in growing market pressure when it comes to delivery speed and certainty, and this creates complexity that strains everyone’s network.

Why FedEx Needs to Focus on B2C

Smaller carriers and gig delivery platforms have been gaining ground by selling on deeper discounts.

FedEx, with its massive global network, can’t afford to keep things the same AND compete on cost alone.

To make its infrastructure work, FedEx needs higher package volumes—and that means growing B2C and B2B at the same time.

This is why over the last year we have seen multiple investments that are geared towards end-to-end solutions and long term viability (FDX, Nimble, etc).

Long gone are the days where providers like UPS and FedEx set consumer expectations. These days it’s Amazon and Walmart who set the bar - and the legacy couriers are being forced to keep up.

Promises like same-day or next-day delivery, delivery day scheduling, precise time windows are all becoming table-stakes in eCommerce.

To compete, FedEx must no only meet these standards, but they need to find some way to wrestle back some of the control.

The 2025 FedEx Strategy

Here’s how FedEx plans to win:

1. Tricolor Air Cargo Strategy 
   
   FedEx has split its air network into three streams
   
   Purple: Overnight packages

   Orange: Regional freight

   White: Deferred packages using passenger planes
   
   This system lets FedEx handle different types of shipments efficiently based on customer requirements.
   
   By categorizing shipments this way, FedEx can optimize aircraft utilization and reduce operating costs while still offering timely deliveries for critical packages.
   

2. Network 2.0
   
   FedEx is combining its air and ground networks into a seamless system. The “one truck, one neighborhood” their operating mantra.
   Expected to save $2 billion by 2027, and is now implemented in more than 50 locations across FedEx's network.
   
   This integration helps streamline routes, reduce fuel use, and minimize package hand-offs (which can cause delays or errors). Furthermore, the model enhances the flexibility to serve both dense urban centers and rural areas effectively.
   
   (One of the biggest advantages that networks like USPS, UPS and FedEx have is their size. They are of a short list of providers that can offer almost 100% population coverage to shippers - doubling down on everyone’s desire for simplicity and ease)
   
   However, implementing Network 2.0 hasn’t come without challenges.
   
   The upfront investment has been significant, requiring FedEx to carefully allocate resources and adjusting services while maintaining service levels.
   

3.  Technology Upgrades
   
   FedEx is betting big on automation and AI. They are investing heavily in technologies to improve operational efficiency. Everything from sorting packages to invoicing.
   
   Advanced machine learning tools predict delivery times and optimize warehouse layouts.
   
   Robotics are being deployed to handle high-demand sorting tasks during peak seasons, ensuring faster turnaround times.
   
   The company is also testing autonomous vehicles and drones for last-mile deliveries, aiming to reduce dependency on labor while enhancing efficiency.
   
   Specific examples include AI-powered routing software that dynamically adjusts delivery routes based on real-time traffic, weather conditions and customer expectations / requirements.
   

4. Customer Centricity
   
   Tools like FedEx Delivery Manager let customers choose how and when they receive packages.
   
   These services build tons of loyalty in the competitive B2C space.
   
   FedEx officially launched its fdx platform on September 18, 2024, making it available to all U.S. customers. This data-driven commerce platform leverages FedEx's network insights to connect the entire customer journey, aiming to help businesses grow demand, increase conversion, optimize fulfillment, and streamline returns.
   

   A few noteworthy points on FDX:

   
   • ShopRunner integration to drive demand and conversion through member-exclusive benefits
   • Predictive Delivery Estimates (PDE) offering real-time shipping data to boost customer confidence
   • FedEx Sustainability Insights to help predict future carbon emissions
   • Branded Order Tracking for customized tracking pages
   • Streamlined returns management through Branded Returns
   
   Early adopters of the program have reported significant improvements, including a 6.33% revenue increase and a 1.34% conversion lift on mobile.
   
   

5. Sustainability
   
   FedEx is aiming for carbon neutrality by 2040.
   
   Electric delivery vehicles, fuel-efficient aircraft, and investments in renewable energy are core to this strategy.
   
   The company’s commitment to sustainability also extends to reducing packaging waste and implementing circular economy practices.

   
   FedEx’s renewing fleet includes EVs like the BrightDrop Zevo 600 (which are specifically designed for urban deliveries).
   
   To support these vehicles, the company is investing in charging infrastructure and collaborating with energy providers to ensure a reliable supply of renewable electricity.
   
   While these initiatives themselves aren’t driving additional revenue from customers, providers like FedEx are betting that shipper expectations will continue to rise for these requirements as those companies look to hit their climate goals. Providers who have not invested in these new technologies will get frozen out of future RFPs, leaving more of the market for those that invested early.
   

6. Spinning Off Freight
   
   Splitting off FedEx Freight allows it to focus exclusively on less-than-truckload (LTL) shipments, making both entities more agile.
   
   This move is particularly important as the LTL market faces slower growth, requiring specialized strategies to remain profitable.
   
   By concentrating resources on core competencies, FedEx ensures that its freight operations remain competitive while aligning with broader corporate goals.
   
   The latest news is showing that FedEx Freight could be valued between $30 billion and $35 billion as a standalone company.
   
   The separation is expected to be completed within the next 18 months and will be structured to be tax-efficient for shareholders.
   
   To strengthen its position in the LTL market, FedEx Freight plans to hire over 300 LTL specialists for its sales force starting in January 2025. This expansion aims to provide better customer support and potentially increase market share.
   
   Finally, FedEx Freight will implement an enhanced pricing system to win business and better utilize existing capacity.

Vis a Vis The Competition

FedEx’s renewed B2C push means more competition for smaller regional players. It also means that they need to be building a stronger value proposition to put up against Amazon, Walmart, UPS, and USPS.

UPS has recently restructured its Ground Advantage (SurePost) program, while USPS is “modernizing” under its ‘Delivering for America’ plan.

FedEx needs to integrate technology into every level of its operations in order to set it apart.

While other companies are catching up, FedEx is benefitting from their early adoption of AI and data-driven decision-making. This focus on innovation and integration will be critical as the parcel industry faces mounting pressures from labor shortages / unrest, fuel price volatility, and government regulations.

Cybersecurity also becoming a growing concern. With increased reliance on digital tools, FedEx has ramped up efforts to protect its systems against cyber threats. Investments in secure IT infrastructure and real-time threat monitoring ensure the safety of sensitive customer data and operational continuity.

Avenues for Revenue Growth

FedEx’s strategy also includes exploring new revenue streams to enhance profitability.

The company is is shifting its focus to capitalize on opportunities within the global air cargo market, targeting high-yield freight and leveraging its extensive air network to expand its presence.

Losing the USPS contract to UPS has left FedEx with additional air capacity that they are looking to leverage. They feel that the current air cargo market as fragmented and reliant on outdated shipping processes, making it ripe for disruption. They are prioritizing premium freight and high-margin business over traditional freight to maximize profitability (the company views this as a logical step given its low single-digit share of the global airfreight market).

FedEx has been building a dedicated airfreight sales team to engage directly with shippers and capture more business.

Additionally, FedEx is investing in specialized logistics solutions for industries like healthcare and technology. For instance, temperature-controlled shipping for pharmaceuticals and high-value electronic equipment is becoming a significant growth area.

What It All Means

The market is heading toward consolidation and tech-driven efficiency. Companies that fail to adapt risk falling behind.

Consumers will benefit from these shifts as competition drives faster deliveries, better tracking options, and improved reliability.

However, the growing focus on automation and efficiency could lead to higher expectations for delivery fees, particularly for premium services - something that most shippers will struggle with.

Regional players will need to innovate or form strategic partnerships to survive.

Opportunities exist in niche markets, or by providing highly customized services for brands. Social commerce and the shifts it will bring to fulfillment is one of the biggest areas of opportunity.

By focusing on areas where larger players will be slower to adapt, regional carriers can remain relevant despite the big push being made by industry giants.

Closing Thoughts

FedEx’s re-prioritization to B2C isn’t going to slow down.

Its focus on network efficiency, customer experience, and sustainability are all for one goal - win more business.

As the industry evolves, strategies like what we are seeing from FedEx show us what’s ahead.

Walmart Is Shook Like A Snow Globe Right Before Christmas

The CFPB filed a lawsuit against Walmart on December 23, 2024.

The allegations involve Walmart's Spark Driver program (which uses gig workers for last-mile deliveries).

Basically it’s another example of how big businesses are using gig work labour to shift or avoid paying fees.

The Consumer Financial Protection Bureau claims that Walmart (and their FI partner, Branch):

• Illegally opened accounts for drivers without consent

• Required drivers to use these accounts to receive payment

• Misled workers about same-day access to earnings

In all, the Branch transactions ended up costing Spark drivers over $10M in fees.

This is alleged to have happened for two reasons.

1. "Instant" transfer fees
   
   Drivers were charged either 2% of the transferred amount or $2.99 per transaction, whichever was greater, to instantly transfer their earnings to an account of their choice
   

2. Minimum fee threshold
   
   Even for small transfers, drivers had to pay at least $2.99, which could represent a significant percentage of their earnings for shorter shifts or smaller deliveries
   

The only fee-free option offered to drivers was a transfer that could take up to five days to process, AND fee-free transfers were only available if the receiving account was at a bank partnered with Branch's financial data transfer service.

For anyone that pays attention to or is close with gig delivery platforms, you know that the vast majority of people doing this work are looking (needing?) daily or weekly payouts.

The reason why so many drivers didn’t simply wait for a free option is because it actually ended up being longer than it seems. Walmart would transfer the funds each week on Tuesday’s to Branch. From there, a driver would have to wait another 5 (to 7) days for it then to transfer into their bank account.

Most drivers simply paid the instant transfer fee and accepted the loss.

On the company side, both Walmart and Branch have strongly denied the allegations and vowed to fight the lawsuit. Walmart stated that the CFPB's lawsuit is "riddled with factual errors" and that they were not given a fair opportunity to present their case

While the legal process is still in its early stages, and it may take time before a resolution is reached, Walmart is already out making changes.

Some Spark drivers are scrambling because not all financial institutions still seem to be accessible as a payout option through the Spark portal.

While this likely won’t have any impact with respect to overall delivery capacity or Walmart’s ability to meet customer promises, it shows the growing divide between the customer experience and driver experience when it comes to on-demand labour models.

In 2025, Everyone Is An “Influencer”

Personally I hate the term influencer.

With the amount of content I create, people have used that to describe me more than once.

And while I dislike the term and what connotations it has (at least for me), there is no debating the market shift towards real and authentic.

For years we have had celebrities then YouTube stars influence our buying decisions. They used their audience and their reach to get lucrative contracts from brands looking to sell more.

Modern brands however area realizing that big names with huge followings don’t have the same ROI they once did.

People are tired of the same ads from the same people saying the same things.

Everyone knows it’s manufactured.

In the same way that platforms like Youtube and Instagram opened doors for artists and models, Tik Tok gave everybody a chance to reach anyone.

Tik Tok’s “interest based” algorithm completed changed what organic reach mean.

So, what does this mean for the world of eCommerce and logistics?

Micro-influencers have become increasingly important in the world of eCommerce. These individuals, typically with 10,000 to 100,000 followers on social media, have built strong relationships with their audience, leading to high levels of trust and engagement.

The influencer marketing industry is predicted to reach $24 billion by the end of 2024 . For every dollar spent on influencer marketing, brands can expect an average return of $5.78.

That’s wild.

It shows why everyone is content obsessed. With so many people making noise, finding people who are deeply connected to your potential customers is a massive shortcut over traditional ads.

What are the benefits of micro-influencers?

Knowing the value and impact of this new advertising strategy is essential to understand as a logistics service provider or eCommerce brand.

You know that in order to get your sales and volume where you want it to be, to continue to scale your brand, you are going to have to get more and more engaged with more people and their communities.

This means that you will see different needs from different bases, that you will have more asks for uniqueness and personalization, that you will need to think of promotions and promises that are tailor made and not generic.

These commitments will increase the complexity of your supply chain.

The reality is, they make fulfillment hard.

More peaks.

More valleys.

Inventory management gets much more important. Where you keep what product and why will be a major strategic decision in 2025.

Also, what last mile providers will you work with? How are they adapting their service offer to meet the different expectations of different communities?

These needs will intensify the need for the separation transactional versus experiential execution.

Service providers too

Pay to play and lazy referral deals are yesterday’s news.

Consumers are increasingly discerning and demand authenticity from influencers. If they feel that you are simply paying for it, it’s not just the influencer that suffers, but those aligned with them as well.

Transparency regarding sponsored content is also crucial to maintain trust.

Brands have already started moving away from one-off campaigns and towards long-term partnerships with micro-influencers. They’re doing this because it osters deeper relationships, builds trust with audiences, and allows for more consistent brand messaging.

If you are a service provider using a spray and pray approach, coining everything as a “partnership”, you are likely killing your gains.

To stand out in crowded social media feeds, brands are encouraging micro-influencers to incorporate distinctive brand elements into their content.

This includes consistent use of brand colors, strong brand hooks in the first few seconds of videos, and seamless integration of brand logos.

What this does is help people remember who you are, what you are doing and why they should pay attention to YOU, and not the next person trying to get their attention.

Making the right type of alliances for your brand or service strengths your business every day (through visible metrics like impressions and reactions, but also through dark social activity).

The question isn’t whether or not you should be leveraging micro-influencers, it’s more about what you are doing and who you’re going to work with.To stand out in crowded social media feeds, brands are encouraging micro-influencers to incorporate distinctive brand elements into their content. This includes consistent use of brand colors, strong brand hooks in the first few seconds of videos, and seamless integration of brand logos.

That’s it for this week. Thanks for being here.