News Article | 7/30/2008

FedEx plans sorting facility

FedEx SmartPost, a subsidiary of FedEx Ground, is opening a sorting facility in Southaven to serve a growing business-to-consumer base, a group of customers it owes almost entirely to the power of online shopping.

SmartPost signed a five-year lease on 150,527 square feet in the DeSoto Trade Center Building III at 4325 Executive Drive in Southaven.

By early October, it intends to have about 80 full- and part-time employees at the facility, gearing up for the peak holiday season.

“Business is consistently growing,” said Ward Strang, SmartPost president and chief executive. “We’re offering a tremendous product that fits well with the FedEx portfolio of services.”

Milwaukee-based SmartPost averages about 618,000 low-weight, low-yield packages a day, getting most of its volume from the nation’s giant e-tailers and catalogers.

It sorts and ships the packages via FedEx Ground to a maze of 21 SmartPost hubs nationwide, where they further sorted, then delivered to the U.S. Postal Service for final delivery.

SmartPost gets a reduced rate from the post office for processing and carrying the packages along most of the journey.

“By opening this facility, we not only improve our work-share discounts and subsequent pricing we can offer our customers, but we also provide a more consistent service, by bypassing integration in the postal hubs,” Strang said.

FedEx bought SmartPost in 2004 to help improve yield on a growing volume of low-weight packages generally destined for residential delivery, where the last mile, particularly in rural areas, is costly for courier companies.

FedEx paid $120 million for the company. In four years, the subsidiary has added nine hubs, with the 10th scheduled to open this year in Los Angeles. Revenue and package volume is growing 3 to 4 percent a year.

“We are cautiously optimistic. We’re seeing very large e-tailers expanding out of their core competency and putting more products online. That appeals to today’s economic sector,” Strang said.

Although FedEx does not break out revenue specifics, SmartPost represents about 18 percent of the volume at FedEx Ground.

The Southaven facility will deliver packages to 500 post offices in the tri-state area. It has capacity to sort 7,500 packages an hour and is large enough to meet SmartPost’s growth projections over three to six years.

Dallas-based Hillwood Investment Properties owns the building.

“Hillwood is delighted to have done the deal,” said Dan Wilkinson, chairman of Colliers, Wilkinson Snowden, who represented the landlord, with Colliers Management Services LLC president Brad Kornegay and Richie Burnette, owner of The Burnette Co.

Fred Placke, senior vice president of Fischer & Co., represented the tenant.

“SmartPost is proof of two things,” Wilkinson said. “One, there is still viability in the Memphis market overall, and two, DeSoto County continues to be attractive to national companies seeking a location in Memphis.”