In the world of e-commerce, shipping is a critical but often overlooked component of the customer experience. Online shoppers today expect their orders to arrive quickly, reliably, and at a low cost. Meeting those expectations requires a complex choreography of logistics, especially when it comes to the "last mile" of delivery.
One of the key ways that major shipping carriers like FedEx are able to offer cost-effective and efficient delivery for e-commerce orders is by partnering with the United States Postal Service (USPS) and other local delivery agents for the final leg of a package‘s journey. For FedEx, this hybrid shipping model is known as FedEx Ground Economy (formerly called FedEx SmartPost).
If you‘ve ever tracked a FedEx package and seen a status update that says something like "Tendered to authorized agent for final delivery", you may have wondered what exactly that means. In this article, we‘ll dive deep into the world of FedEx Ground Economy to demystify the authorized agent delivery process. We‘ll explore why FedEx uses this model, how it works, what the benefits are for businesses and consumers, and much more.
The Basics of FedEx Ground Economy
FedEx Ground Economy is a cost-effective shipping service geared primarily towards high-volume e-commerce shippers. The key distinguishing feature of the service is that FedEx tenders packages to authorized local delivery agents, most commonly USPS, for the final mile of delivery. This allows FedEx to offer more affordable shipping rates by leveraging the efficiency of the Postal Service‘s existing last-mile delivery network.
Prior to 2021, the service was known as FedEx SmartPost. The rebranding to FedEx Ground Economy was intended to better align the service with the broader FedEx Ground portfolio and reflect its expanding capabilities. Some of the key features of today‘s Ground Economy service include:
- Delivery coverage to 100% of U.S. residential addresses
- Support for packages up to 70 lbs and 130 inches in combined length and girth
- Transit times of 2 to 7 business days in the contiguous U.S.
- Ability to ship to P.O. boxes, APO/FPO, and U.S. territories
- No residential or fuel surcharges
- Savings of up to 20% compared to standard FedEx Ground rates
How the Tendering Process Works
The journey of a FedEx Ground Economy package begins the same way as any other FedEx Ground shipment. The package is picked up from the shipper by FedEx or dropped off at a FedEx location, and then transported to a regional sorting hub.
At the hub, Ground Economy packages are scanned and separated from the rest of the FedEx Ground volume. They are consolidated onto pallets and staged for pickup by USPS or another delivery agent. FedEx provides an electronic manifest that contains detailed information about each tendered package.
USPS typically picks up tendered packages from FedEx hubs daily, Monday through Saturday. The packages are then transported to local Post Offices and integrated into the Postal Service‘s last-mile delivery operations. In most cases, the packages are delivered by a USPS mail carrier within 1-3 business days after being tendered by FedEx.
The Benefits of the Ground Economy Model
The FedEx Ground Economy model offers a number of compelling benefits for all stakeholders in the e-commerce ecosystem:
Benefits for FedEx
By partnering with USPS for last-mile delivery, FedEx is able to significantly reduce its own costs, especially in the less population-dense areas that are expensive for a private carrier to serve.
"The Postal Service‘s last-mile delivery network is simply unmatched," says Raj Subramaniam, President and COO of FedEx Corporation. "With more than 30,000 Post Offices and over 200,000 delivery vehicles, USPS has the infrastructure in place to efficiently reach every delivery point in the country six days a week. Tapping into that network for the final mile is a win-win."
FedEx can pass along a portion of its last-mile cost savings to shippers in the form of lower Ground Economy rates, while still maintaining solid margins. The service also allows FedEx to compete more effectively for price-sensitive e-commerce business that might otherwise go to competitors like UPS SurePost or regional parcel carriers.
Benefits for USPS
For the Postal Service, the FedEx partnership provides a valuable source of package volume and revenue. As letter mail volumes have declined in the digital era, package delivery has become an increasingly important part of the USPS business model.
In fiscal year 2022, USPS delivered approximately 268 million packages tendered by FedEx, generating over $2.2 billion in revenue. That represents more than 12% of the Postal Service‘s total shipping and package revenue for the year.
"Working with FedEx allows us to leverage our last-mile delivery network and keep our mail carriers fully utilized," says John Groff, USPS Director of Shipping Products and Services. "The additional package volume helps to support the infrastructure that‘s required to provide affordable and universal mail service to the American public."
Benefits for Shippers
For e-commerce merchants and other high-volume shippers, FedEx Ground Economy offers a number of advantages. The most significant is the cost savings compared to traditional ground shipping. Here‘s a comparison of FedEx‘s published rates for Ground vs. Ground Economy for a few common e-commerce package sizes as of 2023:
| Package Weight | Zone 2 | Zone 4 | Zone 6 | Zone 8 |
|---|---|---|---|---|
| 1 lb | ||||
| Ground | $8.89 | $10.07 | $11.25 | $12.43 |
| Ground Economy | $7.33 | $8.61 | $9.89 | $11.17 |
| Savings | 18% | 15% | 12% | 10% |
| 5 lb | ||||
| Ground | $11.04 | $13.25 | $15.46 | $17.67 |
| Ground Economy | $8.25 | $10.46 | $12.68 | $14.88 |
| Savings | 25% | 21% | 18% | 16% |
| 10 lb | ||||
| Ground | $14.35 | $17.78 | $21.20 | $24.62 |
| Ground Economy | $10.50 | $13.93 | $17.35 | $20.77 |
| Savings | 27% | 22% | 18% | 16% |
As you can see, the cost savings with Ground Economy are most significant in short-distance Zones 2-4, and for lightweight packages under 10 lbs. Shippers can save anywhere from 10-27% compared to standard Ground rates. For businesses shipping hundreds or thousands of e-commerce packages per week, those savings can quickly add up to a meaningful impact on the bottom line.
Another benefit of Ground Economy for shippers is the expanded reach of the service. By leveraging the USPS delivery network, FedEx is able to offer 100% coverage of U.S. residential addresses, including P.O. boxes, rural routes, and other locations that may fall outside of the standard FedEx Ground network. According to FedEx, Ground Economy reaches over 2 million additional delivery points compared to Ground.
The service also helps shippers manage costs in other ways beyond just the base shipping rates. There are no residential or fuel surcharges applied to Ground Economy shipments. In contrast, FedEx Ground currently charges a $5.25 residential delivery fee and variable fuel surcharge that can add roughly 10-15% to the base rate.
Benefits for Consumers
For the end consumers receiving e-commerce orders, FedEx Ground Economy offers the benefit of affordable and reliable delivery with the convenience of having packages delivered directly to their mailbox or doorstep by their familiar USPS carrier. The service supports delivery 6 days a week and is inclusive of P.O. box and military addresses, providing broad and flexible coverage.
Some consumers also appreciate the sustainability benefits of the FedEx-USPS partnership model. By consolidating packages onto USPS trucks that are already making daily deliveries in an area, FedEx helps to limit the number of redundant delivery vehicles on the road. One study estimated that the Postal Service‘s partnerships with FedEx and other private carriers reduce greenhouse gas emissions by hundreds of thousands of metric tons per year.
The Evolution of FedEx Ground Economy
FedEx SmartPost first launched back in 2004 as one of the earliest major collaborations between a private carrier and USPS for last-mile residential delivery. At the time, e-commerce was still a relatively nascent market and most FedEx Ground volume was B2B.
As online shopping grew rapidly over the following decade and residential deliveries became a larger part of the mix, FedEx continued to expand the SmartPost service with better integration into its Ground network. The rebranding to FedEx Ground Economy in 2021 was the culmination of that evolution.
"The rename to Ground Economy is about more than just a label – it embodies the new value proposition of the service within our e-commerce portfolio," said Brie Carere, Chief Marketing and Communications Officer at FedEx. "We‘ve enhanced the service to be more economical, expand our reach, gain stronger alignment with FedEx Ground, and enable a better experience for our customers."
In 2022, FedEx Ground Economy shipments represented 42% of all FedEx Ground residential deliveries in the United States. And the growth shows no signs of slowing down – e-commerce sales are projected to make up over 20% of all U.S. retail by 2025, driving continued demand for cost-effective last-mile delivery solutions.
Tips for Using FedEx Ground Economy
If you‘re an e-commerce business considering FedEx Ground Economy, here are a few best practices to keep in mind:
1. Know Your Package Specs
Ground Economy is a good fit for packages that are under 10 lbs and less than 130" in combined length and girth. The "sweet spot" in terms of cost savings is packages weighing 1-5 lbs. Larger and heavier packages may be more economical to ship via traditional Ground.
2. Focus on Zones 2-4
The Ground Economy cost savings are most significant, often over 20%, in short-distance Zones 2-4. For farther zones, the price advantage may be more marginal compared to regular Ground service.
3. Plan for Extra Time in Transit
Ground Economy has an estimated delivery window of 2-7 business days within the contiguous U.S., a bit longer than the 1-5 day range for FedEx Ground. Be sure to set customer expectations accordingly and allow ample time to meet your delivery promises.
4. Use a Rate Shopping Tool
Many shipping software platforms like ShipStation, ShippingEasy, and Shippo include tools that will automatically compare costs across multiple carriers and service levels so you can easily determine when FedEx Ground Economy is your best option.
5. Understand the Tracking Nuances
Because of the authorized agent handoff process, tracking statuses for Ground Economy packages can sometimes be a bit quirky, with intermediate statuses that say "delivered" when a package is tendered to USPS. Rest assured that your package is still on its way to your customer when you see that "tendered for final delivery" scan.
The Bottom Line
FedEx Ground Economy is a prime example of how innovative shipping solutions are being developed to support the rapid growth of e-commerce. By finding synergies with expert last-mile delivery partners like USPS, FedEx is able to drive down costs and expand its delivery network without sacrificing service quality.
For cost-conscious e-commerce merchants, FedEx Ground Economy can be a powerful tool for managing shipping expenses while still meeting customer expectations for fast and reliable delivery. As online shopping continues to become an ever-larger share of the retail landscape, services like Ground Economy will play an increasingly critical role in the last-mile delivery ecosystem.
