FedEx built their company on overnight shipping, and as far as I know, a majority of the parcels they ship are overnight deliveries.
They also offer a 2-Day delivery option that’s significantly less expensive than the overnight options.
My question is: how do they save money by shipping over two days instead of one? The package starts and ends its journey at the same places regardless, and they already move most of their packages over a single day. I can’t imagine they simply set some packages aside for a day and expect to pay less to ship those packages. So how is 2-day shipping cheaper for them?
The answer has less to do with cost than with marketing. I have received packages shipped with the 2nd day method which have actually sat in their warehouse in my city for a day until the scheduled date arrived.
There will always be people who have to have their package delivered the next day, who are willing to pay a premium price for that service. By offering the 2nd day option, they are capturing the customers who don’t want to pay the high overnight rates, and would otherwise go with UPS ground or the post office. By providing a “middle ground” they get more business.
The key is that the planes are flying and trucks are delivering regardless whether or not the two day package is onboard. They would rather have a smaller part of your money than none at all. Their pricing is probably geared to what the market will bear rather than what it actually costs to deliver that single package.
BTW, I have had two day items shipped to me that have arrived overnight (according to their tracking) and Fedex will hold them at the local office until the next day. They have a rule you can’t pick up your package until one delivery attempt has been made.
There’s also the matter of priority. If the bin from Chicago to New York is full and you have an overnight package, they’ll start another bin for you. If you have a 2-day package, they’ll hold it until the next day.
Related to that, if you send two-day and they have room, they’ll deliver it overnight. I send two-day packages 3-4 times a week and about 40% of the time they are delivered the next day. They’re probably delivering to that location anyway (usually a business) so they just deliver my two-day while they’re at it.