Fedex: Amazon Would Have to Spend 'Tens Of Billions' to Compete With Us

Fedex: Amazon Would Have to Spend 'Tens Of Billions' to Compete With Us
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Business Insider Reporter
3 min read
This story originally appeared on Business Insider

FedEx is not concerned about recent reports of Amazon possibly building up an in-house shipping network, and downplayed it as mere "headline grabbing" stories.

During its earnings call on Wednesday, FedEx Executive VP Mike Glenn told analysts that building a service that rivals FedEx would simply take too long and cost too much.

"While recent stories and reports of a new entity competing with the three major carriers in the United States grabs headlines, the reality is it would be a daunting task requiring tens of billions of dollars in capital and years to build sufficient scale and density to replicate existing networks like FedEx," Glenn said.

He reassured that his partnership with Amazon remains strong and that large retailers have always had their own delivery network to serve their own shipping needs, primarily to move items in and out of warehouses locally. Plus, FedEx's service portfolio far exceeds simple local delivery, spanning everything from express to ground to freight.

"There are hundreds and thousands of local delivery companies in every market in the country delivering parcels," Glenn continued. "That's not the market that FedEx competes in on a day-to-day basis."

"We have the capability to pick up, transport and deliver an item from 95 percent of the human beings on the planet, much less every business in the world, within one to two business days, door to door, customs cleared," he added.

There's been a lot of speculation around Amazon's plan to build its own in-house delivery network rivaling that of FedEx or UPS. It recently leased 20 cargo aircraft and bought thousands of its own trailer trucks, while calling itself a "transportation service provider" for the first time in its annual filings.

In fact, just yesterday, RBC Capital's Mark Mahaney released a note saying that Amazon is working on its own global supply-chain network to cut costs, although he pointed out it would take a few years before it fully rolls out.

"All in, we believe it is likely Amazon will make a concerted effort to take over ever larger portions of its supply chain," the report said. "However, a full-blown Amazon parcel delivery operation would likely take years to complete, so we believe FDX [FedEx] and UPS would have time to react."

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