FedEx has inked a partnership with Walgreens that will bring FedEx services to the pharmacy chain’s stores, according to a joint press release.

Under the pact, Walgreens locations will allow customers to pick up and drop off packages shipped through FedEx Ground and FedEx Express.

The firms will begin a small-scale rollout this spring and expand it through the year, with hopes of chain-wide completion by fall 2018.

The deal could help FedEx capitalize on the boom that rising e-commerce provides. BI Intelligence expects US e-commerce will hit $631 billion in 2020, up from $341 billion in 2015. That comes with staggering increases in package shipments, both to customers and via returns to companies.

As a result, companies like FedEx are seeing a rapid increase in volume, which is of benefit to the company — UPS noted this in a recent earnings call, and it’s likely that the trend is industry-wide. However, with e-commerce firms like Amazon entering the shipping fray, there is risk that many of these orders will be diverted through in-house logistics operations. As competition in the fulfillment industry heats up, providing customers with convenient access to FedEx services in a location they likely already habitually frequent could help drive up business and strengthen the firm’s competitive position. Pharmacies are customers’ top choice for package pickups, according to Retail Dive.

Partnerships like the Walgreens’ deal can also help relieve higher costs associated with increased shipments. Shipping is expensive for companies like FedEx. And costs are exacerbated by things like failed dropoffs that require reattempts — it can take a delivery driver two or three times to deliver a package to a consumer’s home before completing the transaction, which increases delivery time and labor expenses. Expanding into Walgreens, which counts over 8,000 locations in the US — a figure that will likely rise if its merger with Rite Aid is approved — could help limit the frequency of things like additional delivery attempts, helping to keep costs in check.

The parcel delivery industry — a segment of the shipping sector that deals with the transportation of packages to consumers — is booming thanks to e-commerce growth, and players outside the industry want a piece of the pie.

BI Intelligence, Business Insider’s premium research service, has compiled a detailed report on the future of shipping that looks at efforts by Amazon, Alibaba, and Walmart to handle more of their own shipping and concludes that big retailers are well positioned to disrupt the parcel industry.

Here are some of the key points from the report: 

  • Transportation and logistics could be the next billion dollar opportunity for e-commerce companies. The global shipping market, including ocean, air, and truck freight, is a $2.1 trillion market, according to World Bank, Boeing, and Golden Valley Co.
  • There is much at stake for legacy shipping companies, which have seen a boom in parcel delivery as e-commerce spending has risen. Twenty different partners currently share the duties of shipping Amazon’s 600 million packages a year, with FedEx, USPS, and UPS moving the most.
  • Amazon, Alibaba, and Walmart have so far focused on building out their last-mile delivery and logistics services but are increasingly going after the middle- and first-mile of the shipping chain.
  • Amazon has already made major moves across each stage of the shipping journey. It launched same-day delivery service, which it handles through its own fleet of carriers, cutting out any third-party shippers. The company also recently began establishing shipping routes between China and North America.
  • Walmart’s interest in expanding its transportation and logistics operations is almost purely related to cost-savings. It’s begun leasing shipping containers to transport manufactured goods from China and is making greater use of lockers and in-store pickup options to cut down on delivery costs.
  • Alibaba has begun leasing containers on ships, similar to Amazon’s Dragon Boat initiative. This means that Alibaba Logistics can now facilitate first-mile shipping for third-party merchants on its marketplace.

Source: Business Insider