Global Hour

Amazon’s plan to take over the shipping industry could turn into FedEx’s worst nightmare?

Albeit the news surmounting FedEx’s plans to re-strengthen its relationship with Amazon, there is also a wave of skepticism about the business tie, amongst the shipping industry.

Amazon, although, has a staggering share of revenue in FedEx’s business, the company was quick in defending that the online retail brand wasn’t its biggest customer.

A statement on FedEx’s website read, “The percentage of total FedEx revenue attributable to represented less than 1.3 percent of total FedEx revenue for the 12-month period ended December 31, 2018.”

But with Amazon slowly gaining control over various industries, including retail, technology, etc, is the semi-monopoly over the shipping sector slipping from FedEx’s hands?

The partnership between the two has churned billions for FedEx, but Amazon is gearing itself to be self- reliant is the beginning-to-end delivery/shipping process.

The last step in the delivery process, which takes the product to the customer’s doorstep is managed by FedEx. But with Amazon’s recent plans to build its own set of delivery vans to cover the “last mile” of the trip, FedEx has something to worry about.

In September 2018, Amazon more than quadrupled the order of delivery vans (from 4,500 to 20,000). In order to take full control over shipping, it is also building a fleet of Boeing 767 cargo planes to acquire freight control.

This is expected to adversely affect the US based shipping firms, taking away billions of dollars of business away from FedEx, UPS, and USPS. 

Amazon has launched an airline, built a network of distribution centers, and positioned delivery vans across the country. Knowing the disruptive possibility, FedEx has armed itself, bringing additional services to the customers – FedEx Extra Hours.

It provides a next-day local delivery, and odd hour deliveries, which helps put more scope into the FedEx Express network.

Rajesh Subramanian, who became FedEx Express president and chief executive earlier this month, told analysts in December, “When you combine the store infrastructure of retailers with our logistics infrastructure, it allows retailers to offer a compelling value proposition for orders received late in the day. And the launch of our FedEx Extra Hours is clearly a very, very positive step in this regard.”

Hence, with FedEx’s efforts to maintain its shipping dominance, it will be interesting to see how Amazon lunges in with its counter activities!

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