FedEx Corp. (NYSE: FDX) said Wednesday that it has acquired e-commerce platform ShopRunner for an undisclosed sum, a move that elevates FedEx’s footprint in a segment where it has lagged behind archrival UPS Inc. (NYSE:UPS)
Chicago-based ShopRunner connects online shoppers to more than 100 brands via a third-party platform. Platforms such as ShopRunner, and more prominently, Ontario, Canada’s Shopify (NYSE:SHOP), have gained in popularity as merchants seek to expand channels where they can reach more consumers.
The companies expect the deal to close by the end of 2020. ShopRunner will become a subsidiary of FedEx Services, the unit that includes such operations as FedEx Office, the company’s retail storefront. The Memphis-based company’s three main business units are transportation providers FedEx Express, FedEx Ground and less-than-truckload (LTL) operator FedEx Freight.
The acquisition aligns with FedEx’s efforts to “create an open, collaborative e-commerce ecosystem that helps merchants deliver seamless experiences for their customers,” said Raj Subramaniam, the parent’s president and chief operating officer. “We are committed to growing the ShopRunner platform and combining it with our global digital and logistics intelligence to create new possibilities in e-commerce.”
Historically, ShopRunner’s merchants have selected the shipping providers they make available to their customers. It is unclear if that policy will change once ShopRunner is under the FedEx umbrella. ShopRunner provides members with free two-day shipping and free returns shipping, among other benefits.
Atlanta-based UPS (NYSE:UPS) has been considered more aggressive than FedEx in partnering with third-party platforms in an effort to become the platforms’ transport and logistics backbone. At the end of 2017, UPS teamed with Shopify, perhaps the best-known platform, to integrate UPS’ products and services into Shopify’s system. Earlier this year, FedEx teamed with a platform called BigCommerce to provide essentially the same type of service.
“FedEx has always been behind UPS when it comes to simple connectivity to third-party, e-commerce platforms,” said Dean Maciuba, managing partner at consultancy Last Mile Experts, and a long-time FedEx executive. The Shopify partnership is “a huge advantage for UPS from a connectivity and shipping discount standpoint,” Maciuba said. For FedEx, playing catch-up to UPS in this area “will not be easy,” he added.
Brittain Ladd, an e-commerce consultant, expressed disappointment that FedEx didn’t take a bolder step or head in a more strategically advantageous direction. The company could have teamed with others to bid for Shopify or acquire the on-demand warehousing firm Flexe, Ladd said. Even a bid for the U.S. operations of the wildly popular Chinese website TikTok should not have been ruled out, according to Ladd. “TikTok can create storefronts for retailers and also do streaming retail. FedEx could provide all fulfillment and eventually manage the entire supply chains for the retailers and 3rd-party sellers,” Ladd said in an email.
The blunt-spoken Ladd said that “FedEx is a company that is comfortable with thinking small when they should be focused on thinking big. The value of ShopRunner to FedEx will be minimal at best. Frankly, I’m surprised [FedEx founder, chairman and CEO] Fred Smith approved the acquisition.”