In an effort to expand its presence in the low-cost home-delivery market, FedEx Corp. has agreed to purchase Parcel Direct for $120 million. The division of Sussex, Wis.-based printer Quad/Graphics provides parcel-consolidation services for online and catalog retailers.

Parcel Direct will give FedEx a lower-cost means of shipping parcels to consumers through the U.S. Postal Service (USPS), says parcel express expert Satish Jindel of SJ Consulting Group. The purchase "signifies a recognition by FedEx management that there's a lot of business for low-value product in the home-delivery market," he says.

The acquisition should also solidify the close working relationship that FedEx has established with the USPS. FedEx has a seven-year, $7 billion contract to provide transportation services for the postal service, and recently entered into an agreement to provide a co-branded international service. FedEx also has an agreement to place nearly 5,000 drop boxes at post offices around the country.

Jindel notes that the acquisition of Parcel Direct puts FedEx on a more equal footing with rivals UPS and DHL, both of which have ground offerings for low-value products. "FedEx, UPS, and DHL are no longer just parcel carriers," he says. "They are transportation and logistics providers who handle everything from documents to heavy shipping."

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