FDX FedEx Corp

By Jennifer Smith 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (April 14, 2018).

More big trucking companies are looking to cash in on home delivery of bulky items as consumers grow more comfortable shopping online for furniture and other goods too big for conventional parcel networks.

Ryder System Inc. is the latest operator to jump into the business, paying $120 million this month to buy MXD Group, a logistics firm that specializes in "final mile" delivery of big items to consumers' doorsteps.

The deal extends Ryder's bid to move into areas beyond its well-known truck-leasing business, and reflects the growing attraction of a sector that has been transformed by e-commerce.

Shoppers accustomed to getting online purchases in days, not weeks, and tracking those packages, now look for similar service when they buy big items like couches, washing machines and exercise equipment. Such objects often require installation or special handling, and may not fit in the highly automated systems that carriers like United Parcel Service Inc. and FedEx Corp. use to sort millions of packages each day.

That has drawn in large trucking operators who want to use their scale to lure large retailers as customers for home-delivery services.

Furniture is one of the fastest-growing segments of U.S. online retail, with Amazon.com Inc., Wayfair Inc. and other e-commerce firms competing for market share with big-box stores and furniture chains like Crate and Barrel.

"Last-mile has taken off like crazy," says Daniel Sayne, director of sales at Fidelitone Inc., which delivers furniture for Amazon, Wayfair, and others. Newer entrants to the segment include Green Bay, Wis.-based Schneider National Inc., one of the largest U.S. truckload operators, as well as Richmond, Va.-based less-than-truckload carrier Estes Express Lines.

Home delivery poses big challenges for trucking companies, however.

Operators with business models built on delivering goods by the pallet or truckload to industrial loading docks must send drivers on irregular routes down residential streets to hit specific delivery times. Workers may have to enter homes and take the time to install products.

"Home delivery is more finicky, more risky and more costly," said Paul Thompson, chairman of Transportation Insight LLC, a supply-chain management and logistics firm. "To really have a cost-efficient last-mile network, you have to have density."

For the trucking companies, however, the service helps them move into one area in the retail world that is growing rapidly as digital sales carve away business from brick-and-mortar stores.

"Our strategy is to penetrate all six of those big-box retailers that have a lot of density and a lot of delivery on big and bulky products," Nicholas Hobbs, president of dedicated contract services at J.B. Hunt Transport Services Inc., said at an investor conference last month.

J.B. Hunt, which has long offered last-mile delivery to customers such as appliance-maker Whirlpool Inc., expanded its reach last year by buying provider Special Logistics Dedicated LLC for $136 million. The company expects between $300 million to $350 million in final-mile revenue this year, up from about $250 million in 2017.

Ryder was already doing a small number of consumer deliveries for customers in its supply-chain and dedicated trucking segments. The MXD deal gives Ryder a national network of 109 e-commerce fulfillment facilities, including 21 cross-docking hubs. The carrier also inherits MXD's customers -- retailers selling furniture and appliances online and by catalog -- providing an opportunity for selling those companies other Ryder services.

"We saw this as a space where we could be a leader," Ryder Chief Executive Robert Sanchez said in an interview. "Customers that we are currently running distribution centers for, customers where we're doing delivery to retail stores, this is another piece of that puzzle."

XPO Logistics Inc., the U.S. market leader in big-and-bulky home delivery, is now rolling that service out in Europe, where many urban consumers lack cars and depend on delivery to get big purchases such as refrigerators home.

Much of the sector is made up of smaller carriers. Bigger fleets often rely on a combination of company trucks and networks of contractors to deliver bulky goods across wide swaths of the country.

Noël Perry, a transportation economist and principal at consulting firm Transport Futures, estimates the final-mile market for bulky items, currently about $3.7 billion to $4 billion, will expand to about $12 billion over the next decade. That's still just a niche in a U.S. trucking industry that counts around $676 billion in annual gross freight revenue.

"It's too early for this kind of thing to have the kind of growth or profitability that acquirers are expecting," said Mr. Perry.

Write to Jennifer Smith at jennifer.smith@wsj.com

(END) Dow Jones Newswires

April 14, 2018 02:47 ET (06:47 GMT)

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