FedEx Courts Mom and Pop

SAN FRANCISCO (06/13/2000) - Shipping giant FedEx Corp. (FDX) plans later this summer to jump into the increasingly crowded field of companies targeting mom-and-pop stores by courting them with Web services.

FedEx has teamed up with Orbit Commerce in Chicago to launch a new service that helps small- and medium-size companies build an online presence though FedEx.

The FedEx service would enable firms new to the Net to create services that include real-time financial settlement, customer e-mail notification and FedEx shipping and tracking, the companies announced today. The venture begins beta-testing this week.

FedEx hopes to tap its current 2.5 million small-business customers for the new service, said David Roussain, FedEx VP of e-commerce marketing, who would not disclose an exact launch date or pricing details. But it remains to be seen whether a marriage of FedEx's shipping and Web services would appeal to small businesses.

"It's pretty clever of FedEx to get a clue and think, 'Maybe if we help small businesses build new Web sites, they might be more apt to send their packages using FedEx,' " says Kneko Burney, director of e-business infrastructure and services at Cahners In-Stat Group in Scottsdale, Ariz.

Office-supply company Staples (SPLS) also has talked of expanding into Web services, and UPS might not be far behind, Burney noted. She predicts, however, that because many small businesses are still exploring the Internet, they're more likely to turn to competitors who aren't trying to sell anything else but Web services.

The market that FedEx is trying to break into is a valuable one. In-Stat estimates that about 11.5 million companies operate in the U.S. with less than 100 employees. This year, those small companies are expected to spend $50 billion on the Internet, on everything from equipment to employees.

But FedEx's late arrival to a space already crowded by about two-dozen competitors might hamper its effort. The company is offering the first tier of Web-enabling services needed by small businesses, but competitors already are working on second and third tiers such as marketing and helping small businesses expand online.

"FedEx is coming to the market with something that is a little out of date already," Burney says.

Indeed, Serge Wilson, founder of Freemerchant.com, expressed little worry about new competition from a behemoth like FedEx.

Although Freemerchant has only 16 employees in San Francisco, the company was acquired in April for $34 million by Network Commerce, whose ShopNow.com (SPNW) division is expected to provide Freemerchant's 80,000 merchants with the wide audience that it previously lacked. Wilson, now an executive VP of Network Commerce, says he has a hard time imagining why shoppers would go to FedEx first rather than to online retailers that are primarily associated with shipping.

In addition, Wilson noted that small-business owners are an extremely cost-conscious group and thus might be more likely to ship via the U.S. Postal Service than FedEx. Anticipating this, Freemerchant recently added a feature that enables small-business customers to track shipments with the U.S. Postal Service online.

But FedEx's Roussain said FedEx.com's 1 million daily visitors would be actively targeted by marketing promotions aimed at small businesses.

"[The small businesses will] be able to compete with the big boys," Roussain says.

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