Will FedEx’s ShopRunner deal give retailers a better shot against Amazon?

Photo: @TonyTheTigersSon via Twenty20
Dec 10, 2020

FedEx last week announced that it had agreed to acquire ShopRunner, the Prime-like subscription service that offers two-day delivery from more than 100 retailers. The service is seen as an alternative that may be able to combat Amazon’s growing market share and its third-party fulfillment ambitions.

ShopRunner’s $79 yearly membership also includes free returns, member discounts and seamless checkout. Merchants in the program include American Eagle Outfitters, Saks and Under Armour.

ShopRunner’s data-driven marketing and omnichannel capabilities help participating companies “acquire high-value customers and accelerate their digital innovation,” according to FedEx’s statement.

Once the deal is closed, according to the press statement, “the complementary nature of ShopRunner’s pre-purchase offerings combined with FedEx post-purchase logistics intelligence will enable merchants to attract and engage consumers at scale.”

Pandemic-related logjams are believed to have delayed Amazon’s entry into third-party fulfillment. But with ramped up hires and investments to meet surging online demand, Amazon’s delivery network promises to be a formidable competitor to UPS and FedEx post-pandemic.

UPS has been more aggressive than FedEx in partnering with third-party platforms, including Spotify, to better compete with a potential one-stop selling solution from Amazon.

The ShopRunner purchase builds on FedEx’s recent moves to enhance its e-commerce platform. These include ending its ground delivery contract with Amazon last August to position itself as the go-to option for other retailers, as well as the expansion of ground delivery to seven days a week and a BigCommerce e-commerce platform partnership.

“It’s an interesting move as FedEx continues to build out capabilities outside of moving packages from A to B,” Matt Weickert, a Shipware consultant, told Multichannel Merchant. “In this case, they’ve acquired ShopRunner’s marketing and omnichannel enablement. Basically, they’re purchasing data and ecommerce market insights with this acquisition.”

Others questioned the rationale behind the deal, considering that delivery priority is shifting to next-day. Shopify and on-demand delivery platforms are also looming as bigger competitors for the last mile.

“If you are competing with platforms like Uber and DoorDash and all of these people that have digital money behind them … trying to compete in a digital marketplace with an analog P&L is very difficult,” Bryan Gildenberg, SVP of commerce at Omnicom Retail Group, told Modern Retail.

DISCUSSION QUESTIONS: What do you think is behind FedEx’s deal to acquire ShopRunner, and will it attract more merchants competing with Amazon to the program? How do you see the battle over retail’s last-mile shaking out over the next few years?

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7 Comments on "Will FedEx’s ShopRunner deal give retailers a better shot against Amazon?"

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Mark Ryski

Overall, this seems like a sensible move by FedEx. Adding the ShopRunner capability will provide additional delivery options and more importantly provide FedEx with a new platform to build from. The battle for the last mile is still very much in progress and this is just another small step by one of the big players.

Neil Saunders

It’s smart for FedEx to acquire a retail logistics solution that rivals Amazon at a time Amazon is still growing its own extensive logistics network and continues to build retail market share. However Amazon and its Prime service are light-years ahead of ShopRunner. Two-day shipping – great, but Amazon can deliver many items on the same day. Some member benefits – great, but Prime gives me access to movies, other content, and discounts at Whole Foods. And so the list goes on. So this deal is good, but it is playing catch-up not leading the way!

Gene Detroyer

Strategically, this is a no-brainer for FedEx. It will replace some of the business lost to Amazon’s self-development of logistics.

I believe it will attract small merchants in particular, but like Saks, AEO, and UA, they won’t give up on Amazon. Amazon offers too much much. Amazon is the mega-mall where the customers are. Amazon’s ability to handle merchandise efficiently, including returns, is unsurpassed.

For a merchant to choose ShopRunner in lieu of Amazon is shooting oneself in the foot.

Mohamed Amer, PhD

ShopRunner is part of the growing multi-sided platform model with their network effect. The unique advantage that ShopRunner has over Amazon is in facilitating direct connections between consumers and retailers. Retailers benefit from joining these multi-sided platforms and, with ShopRunner, retailers expand their potential customer base with each additional consumer that signs up for the platform. ShopRunner’s historical reliance on apparel sales suggests an opportunity exists to expand into other categories popular with high-value consumers.

Competing on shorter delivery times, for now, favors Amazon, and it’s unlikely that the FedEx-ShopRunner combination will change that. What we do get is a much stronger execution capability for ShopRunner and a wealth of consumer data for FedEx that connects the front-end demand and purchase behavior with the last-mile logistics network.

Ricardo Belmar

In some ways, this acquisition is so logical for FedEx that you must ask, what took so long? ShopRunner is a multi-faceted platform. It not only has an appeal to smaller retailers but also to DTC brands and FedEx is trying to appeal more to those up-and-coming brands. By severing their Amazon relationship FedEx sent a message to retailers that they want to be the logistics provider for everyone else not named Amazon. But UPS is still around and not going away. So, FedEx needs more than a statement to differentiate itself from other providers. We now have many new 3PL and 4PL providers emerging during 2020 that can also threaten FedEx’s position in the industry. They needed to do something dramatic and ShopRunner gives them a good first step. What FedEx does next will determine how large a step this proves to be.

Bindu Gupta

Smart move by FedEx to compete more effectively with Amazon!

Rachelle King

FedEx is right to try to diversify their core capabilities. This seems like a long game though. These types of acquisitions can ultimately make them stronger and sharper in the end, if they stay focused on building strategic commerce capabilities that complement their expertise in logistics.

The nature of ecommerce now is that every few months, there is likely to be a new contender in this space offering something relevant to a few hundred people. They key is to pay attention to either the technology/intelligence behind it or the prospect of driving a strong concept to scale. Profitably.


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