FedEx acquired third-party logistics company Genco, expanding the company’s portfolio to include reverse logistics which deals with the processing of returns for retailers.

Genco specializes in reverse logistics, processing more than 600 million returned items annually. The acquisition is set to be completed in 2015.

In a recent quarterly earnings call, FedEx Services president and CEO Mike Glenn called Genco a market leader that would be transformative for FedEx’s portfolio of e-commerce and supply chain solutions.

“Genco is one of the largest third-party logistics providers in North America,” said Glenn. “They have a broad range of product lifecycle and supply chain services that will significantly expand our portfolio.”

Genco’s reverse logistics business serves large brands by processing, testing, repairing, remarketing and liquidating returns, mostly from purchases made online.  FedEx was initially hesitant to enter the 3PL business because of relatively low profit margins but became interested in Genco because the company focused on returns which is important to online consumers.

“The attractive part of Genco was that it had sailed directly with those winds into the market leadership in the reverse logistics space,” said Fred Smith, chairman and CEO of FedEx. “With FedEx Ground and FedEx Smart Post in that sector, it was just a natural fit.”

In a recent release, UPS announced that it was expecting returns from the holiday season to number in the millions by the first week of January. Part of the reason for this is that returned purchases are on the rise thanks to online purchasing. UPS even found that 68% of consumers would complete an online purchase if the retailer offered a free return shipping label.

“Returns in the e-commerce segment are a more important issue than they are in a typical retail channel, representing a larger percentage of overall sales,” said Glenn. “It’s critical that we have these capabilities.”