‘Tis the season of many happy returns – specifically, the gift-return frenzy following the Christmas holiday. FedEx, which supplied many of the millions of gifts that were unwrapped Christmas day, now may be seeking a piece of the lucrative returns market with the recent acquisitions of reverse logistics firm Genco and the cross-border e-commerce IT service provider Bongo International.
Pittsburgh-based Genco, through its Genco Marketplace, sells returned and surplus inventory to discount retailers, who purchase the goods in bulk at wholesale prices for resale at deep discount, often to overseas customers. Meanwhile, Bongo International, based in St. Petersburg, Fla., helps make duty and tax calculations, currency conversions and other export compliance management services for international e-commerce retailers. Bongo currently has a client network of about 2,000 retailers in the U.S. and Europe.
FedEx said in a statement that Genco had annual sales of US$1.6 billion and more than 11,000 employees, handling more than 600 million returned items a year. Satish Jindel, president of SJ Consulting Group Inc., told Bloomberg that he estimated GENCO’s total market value at about US$2 billion.
The Genco acquisition, still subject to approval by federal regulators, is expected to close early next year.
By purchasing Bongo and Genco in mid-December, FedEx appears to become a larger player in the e-commerce supply chain, positioning itself to not only secure the outbound shipments from manufacturers to retail stores to customers across the globe, but also to coordinate the returns, using its FedEx Ground, FedEx SmartPost and FedEx Express services.
This year, With November retail sales up 3.2 percent in the United States over November 2013’s figures, the National Retail Federation is sticking to its October prediction of a 4.1 percent year-over-year growth in sales for this holiday season. On average, about 30 percent of these holiday transactions that are made online are returned.
After hiring an additional 50,000 temporary workers for the 2014 peak, the express company said it expects to handle a record 290 million packages this holiday season.
Earlier this month, FedEx reported net income up 23.2 percent, year-over-year, in the second quarter of its 2015 fiscal year to $616 million, while total revenue rose 4.7 percent to $11.94 billion. (For more details on FedEx’s Q2 results, see this report in our sister publication, Cargo Facts.)
Despite the positive quarterly results, FedEx said its peak shipping volume in November was less than expected, due to the continuing congestion at West Coast ports. During the company’s Q2 2015 earnings call, FedEx Chairman and CEO Fred Smith also warned that the weeks-long delays at the ports will likely have long-term repercussions on the rest of the holiday season’s performance, mostly because insufficient inventory was cleared in time for it to reach retailers.
As a result, FedEx saw more traffic diverted to East Coast ports and had to shift some of its fleet of 600 aircraft and 90,000 vehicles to the coasts rather than to its distribution centers in the middle of the country. The company also had to put limits on customer volumes to ensure it could meet its service commitments.
“I suspect that you’ll see a lot of purchases of gift cards in lieu of merchandise, and in January you’ll see some of that traffic moving in the truckload sector and elsewhere into the retailing brick-and-mortar system,” Smith added.