For the past nine years, Amazon has made aggressive moves in the logistics space, first building up its internal infrastructure of warehouses, trucks, vans, and planes and now offering logistics services to outside customers. All of which has caused rumblings that the e-commerce giant could become a rival to the leading parcel-shipping providers FedEx and UPS. Fred Smith, the legendary founder and former CEO of FedEx, however, is dismissive of that idea.
“We don’t look at Amazon as a direct competitor,” he said during an event at the Massachusetts Institute of Technology’s Center for Transportation and Logistics (CTL) on Thursday.
The reason, according to Smith, is that FedEx, unlike Amazon, has an extensive global network of hubs and spokes for processing packages. “We can pick up at any place virtually in the world and we can move it through that networks or networks and deliver it to any address in the world,” explained Smith. “That’s what we do. … Amazon doesn’t have any such network.”
Instead, Amazon’s delivery and transport systems are designed to move inventory held in a small number of distribution centers across the country so that customers can get them in two business days, said Smith.
“The fact that they fly airplanes doesn’t mean that they are doing what we’re doing and vice versa,” he said.
Smith went on to say that the only “pure competitor” that he sees FedEx having is UPS. (While DHL is strong overseas, it does not have a big presence in the United States, and the U.S. Postal Service mostly handles lightweight packages, according to Smith.) In contrast, Amazon’s major competitors are large retailers like Walmart, Target, and Home Depot, said Smith.
“We have a lot of respect for Amazon, but we don’t look at them as a pure competitor, and I’m sure they don’t look at us as a pure competitor,” said Smith. “Because they are essentially a retailer who makes the vast majority of their money from selling you things and taking margin on that, and they don’t have networks that move things from every point to every point, the way that we do.”
Furthermore, Smith doesn’t believe that Amazon will seek to replicate FedEx’s hub and spoke network in the future, quipping that it would take “about $150 billion” for them to do so.
“It would be a fool’s errand to do that,” he said. “If they wanted to do it, quite frankly I think they would have had an acquisition in that space.”
Smith’s comments came as part of fireside chat with MIT Professor Yossi Shefi that kicked off the 50th anniversary celebration for MIT’s Center for Transportation and Logistics (CTL). (Coincidentally, CTL and FedEx both began operations in 1973.) The conversation ranged across topics such as innovation, globalization, and sustainability.