Logistics Report: FedEx’s China Stakes; Wilting Flower Delivery; Betting on Warehousing

Date: Tuesday, June 4, 2019
Source: The Wall Street Journal

FedEx Corp. is getting more deeply mired in a confrontation between the U.S. and China. The delivery giant’s own internal protocols to comply with the Trump administration’s crackdown on Huawei Technologies Inc. caused FedEx to misroute two of the Chinese company’s packages to the U.S., the WSJ’s Paul Ziobro reports. Chinese authorities are investigating the FedEx action in a case with potentially significant implications for Western parcel operators in the country. China’s Commerce Ministry is setting up an “unreliable entity list”—a blacklist of foreign companies that break contracts, harm Chinese companies for noncommercial reasons or damage national security interests. FedEx has apologized for the misdirected shipments, and faces high stakes in the outcome. The company has 9,500 workers in China and its logistics network covers 400 Chinese cities, along with major hub operations in Shanghai and Guangzhou.

Digital commerce proved to be no bed of roses even for a company built on the high-risk delivery of perishable products. Flower-delivery provider FTD Cos. filed for chapter 11 bankruptcy protection, the WSJ’s Peg Brickley and Jennifer Smith report, with plans to sell its businesses to pay off an overload of debt from the 2014 acquisition of onetime rival ProFlowers. FTD’s plunge into financial trouble after more than 100 years in business came after the company failed to keep pace with a retail environment that has been super-charged by online sales tools. FTD’s early innovation was to defeat the logistical challenge of delivering a perishable commodity across long distances by having florists trade orders within a network that grew into a company. New startups appeal more to younger shoppers with speedy delivery and transparent delivery fees, and by cutting out middlemen to source directly from farmers.

E-Commerce

A leadership upheaval at Bed Bath & Beyond Inc. carries important lessons about the impact of e-commerce on struggling retailers. Activist investors unseated top officials at the home-goods retailer after a two-month board battle, but the problems at the company have been years in the making and were largely created by the retailer’s own management. While nimble new competitors were growing, the WSJ’s Suzanne Kapner writes, Bed Bath & Beyond has been hamstrung by a frugal culture that stifled innovation. At warehouses that fulfilled online orders, products were picked and packed manually, and work once fell so far behind, digital marketing had to be suspended for several weeks. The company’s experience suggests that blaming Amazon.com Inc. for troubles that have crushed some retailers glosses over the strategies and decisions at the struggling companies while chains like Walmart Inc. and Best Buy Co. have adapted to the digital age.

Supply Chain Strategies

Blackstone Group LP is betting e-commerce trends are more enduring than fluctuations in the logistics market. The private-equity giant’s $18.7 billion acquisition of the U.S. warehouse portfolio held by Singapore’s GLP comes at a generous price, the WSJ’s Lauren Silva Laughlin and Dan Gallagher write in a Heard on the Street column. The warehousing market has been booming because companies such as Amazon and Walmart Inc. are snapping up space close to big cities to handle the tricky logistics of short-term shipping. Some industry indicators have been softening recently, however, and new construction has started to catch up to demand, Deloitte says in a new report the market may have peaked last year and is set to cool down. Yet retailers also are stepping up their competition over next-day and same-day delivery, and they’ll likely have to pay a premium to get closer to consumers.

 

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