FedEx foes may gain if labor woes deepen

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Catalogers like Lillian Vernon Corp. could shift business if Federal Express Corp.'s pilot union dispute causes holiday delivery delays.

So far, the cataloger hasn't had any problems because of the FedEx fray, but it's prepared to go to the competition if complications occur closer to the December holiday.

"Right now, we are not reacting, but if need be, we will shift to the overnight delivery service of the U.S. Postal Service," said David Hochberg, VP-public affairs for Lillian Vernon.

About half of Vernon's deliveries are handled via FedEx, with the rest done by the postal service.

If the labor situation worsens, this could make the holiday catalog season even rougher. Already, catalogers must cope with higher paper and postage costs that will ultimately affect their bottom lines. But now, the industry is faced with potential delivery problems that could add to operation costs this holiday.

"The other carriers would gleefully pick up the volume that Fed-Ex loses, but it's a big chore for the catalog companies," said Maxwell Sroge, an Evanston, Ill.-based catalog consultant. "The last thing catalogers need is an increase in the cost of package delivery."

Many catalogers have FedEx contracts, and if they were forced to shift business to alternative carriers, the cost would be greater.

"Overnight delivery is a major promotional vehicle for catalog companies," Mr. Sroge said. "It has enabled them to overcome one of the biggest handicaps that catalogers have over retail stores--the immediacy of receiving a purchase."

FedEx has been a real asset to catalogers, helping the industry condition its consumers to purchase items as late as Dec. 22.

"FedEx has really been the leader in working with the catalog industry," Mr. Sroge said. "The idea that the company might be unreliable in the last few days of the Christmas season is really a concern."

FedEx is operating with a business-as-usual mentality. The company has been issuing daily reports that deliveries are proceeding normally and future flight operations are adequately staffed.

"We have had a lot of support from our catalog customers, who told us they will stay with us," said Shirlee Clark, media relations specialist at FedEx.

The complications started to surface when talks with the Air Line Pilots Association broke down late last month. The union ordered pilots to refuse overtime. Reportedly, about half of FedEx's 2,900 pilots belong to the union.

Even though the company seems to be calm about the union situation, a group of non-union pilots decided to take action through advertising.

Locally, the group of non-union pilots placed a quarter-page ad in The (Memphis, Tenn.) Commercial Appeal in FedEx's hometown, pledging their loyalty to FedEx and emphasizing the company's dependability.

The ad, produced by Archer Malmo, is tagged "Paid for out of the pockets of the loyal pilots of FedEx." The ad was in response to an Air Line Pilots Association ad that ran earlier in the week locally and in USA Today.

FedEx competitors DHL Worldwide Express, United Parcel Service and the U.S. Postal Service haven't been able to determine whether extra business, or phone inquiries to their service centers, is a direct result of FedEx's trouble in the air. And no one is ready to spring any new marketing plans to acquire possible extra FedEx business.

A DHL spokesman said customer service calls are up 10% to 15% compared with the week prior to the labor problems, but the company believes that's a result of the recent Thanksgiving holiday and the fact that holiday shipping is heating up.

"We have had larger customers in selected markets who split between DHL and Federal tell us they will use us exclusively if this becomes a problem to them," said Dean Christon, DHL manager of marketing communications. "We believe some FedEx customers are nervous but that it is a case by case situation."

UPS said it's taking the high road and doesn't believe it appropriate to go after FedEx customers.

"We are expecting our own capacity is going to be strained for the holidays, and it is unlikely we are going to have the ability to accommodate any significant volume" increase, said Ken Sternad, public relations manager.

Mr. Sternad said UPS has been contacted by FedEx customers. "We are telling people we have ground capacity," he said. UPS handles 1.5 million packages a day and company officials say they expect that to double in the coming weeks.

"But it is impossible to know where that volume is coming from," Mr. Sternad said. "We have had more calls, but I don't know if it is associated with the FedEx situation."

A postal service spokeswoman said there has been a "slight increase" in Express Mail.

Copyright December 1995 Crain Communications Inc.

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