Bloomberg has a story about FedEx founder/CEO Fred Smith, who reinvented the parcel delivery business but now is "getting disrupted himself by e-commerce and the rise of online shopping. He’s taking a pounding from Wall Street for FedEx’s disappointing performance, while analysts praise archrival United Parcel Service Inc. for reversing a decline in profit margins."
And now, he is deliberately steering his company away from the e-commerce lanes that Amazon has dominated, "drawing the battle lines, positioning FedEx as a kind of anti-Amazon ally for big-box retailers and pledging that his strategy will soon enable FedEx to overtake UPS."
It hasn't been a great couple of years: "FedEx’s international business has been plagued by setbacks, including a 2017 cyber attack and a costly air-fleet expansion that was undercut by Donald Trump’s trade wars. Back home, a falling out with Amazon.com Inc. drained $900 million off the courier’s top line."
It is hard to say which company Smith sees as FedEx's primary enemy: "The two biggest parcel delivery companies in North America are forging dramatically different paths as they adjust their business models to the tsunami of e-commerce. Their success will help decide the market war between Amazon and Walmart Inc., and perhaps the future course of the entire retail industry.
"While UPS is deepening its ties to Amazon, FedEx has broken away, instead working to strengthen its relationship with brick-and-mortar retailers to help them win at e-commerce. While UPS wants to stay neutral with customers, Smith is banking on an us-against-Amazon mentality."
Part of what FedEx is doing is taking more control over its business processes: "UPS is relying more on the U.S. Postal Service, especially for Sunday deliveries, while FedEx is taking back about 2 million packages a day that it had been handing off to the government agency for final delivery. With the increased volume, FedEx can better leverage its more than 600 sorting and delivery facilities around the U.S. to help retailers with shipments from stores to residences."
You can read the entire Bloomberg story here.
- KC's View:
I may be wrong about this, but is it presumptuous for FedEx to assume that Walmart or other big retailers won't put the same kind of pressures on it long-term that it received from Amazon?
I do think that on the face of it, FedEx seems smart for taking a path less traveled … it can be problematic, and certainly not differentiating, when everybody does the same thing. And in general, I like when companies take ownership of their key functions, as opposed to outsourcing it.
I also think that there definitely is a role for companies that can serve an organizing role for small retailers that may be short of investment capital but want to find ways to compete with Amazon and its brethren. FedEx, to borrow a phrase often employed here on MNB, will have to offer a lot more resources to its customers, as opposed to just offering its usual menu of products.