On Tuesday, FedEx released a curious statement to investors:
“Amazon.com, Inc. is not FedEx Corporation’s largest customer. The percentage of total FedEx revenue attributable to Amazon.com represented less than 1.3 percent of total FedEx revenue for the 12-month period ended December 31, 2018.”
It is rare for a large public company to disclose customer relationships such as this. So what caused FedEx to come out and say that Amazon is not their largest customer?
Press Coverage After Analyst Reveals Concerns
Morgan Stanley analyst Ravi Shanker issued a note to investors in December that said:
“The market is missing the risk Amazon Air poses to UPS/FDX growth.”
Since then, just about every major business news organization has published a story about the threat Amazon’s logistics expansion is posing to UPS and FedEx.
Much of this coverage is fueled by an aggressive logistics expansion by Amazon. Here is a list of the most important logistics news from Amazon in the past 12 months.
- Amazon announces SWA (Shipping with Amazon). (Link)
- Amazon announces it has secured 20,000 vans to build a logistics network with independent owner/operators. (Link)
- Amazon is building its own air hub at Cincinnati/Northern Kentucky International Airport. (Link)
- Amazon is looking to lease 20 more Boeing 767s to expand its fleet of Prime Air planes. (Link)
Real Threat is Pricing
Regardless of the volume the carriers have with Amazon, the real threat of an expanded Amazon logistics network may be pricing.
According to Shipware, a logistics consultancy and invoice auditor, UPS and FedEx have about 85 so called “accessorial charges,” fees that are added to the base rate.
The most commonly known are fuel surcharges, residential delivery charges, and extended (remote) area charges.
According to some published reports, Amazon is considering a simpler fee structure that eliminates many, if not all, of these surcharges.
Many shippers are tired of the (added profit) nickel and dime game the larger carriers play with their rates and likely would give a simplified rate structure a good hard look.
This might be the real threat by Amazon to UPS and FedEx, not the volume these two carry right now in Amazon packages.
Do you think Amazon can become a real threat to UPS and FedEx? Please use the comments section below or head over to our Facebook Group for Small Business Sellers and interact with other small business owners.
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