Originally Posted by
Cobia296
This is a major threat to us. Once they finish building warehouses, there wont be near as much need for moving freight by air. The freight will be stored in these massive warehouses in strategic locations around each US city. Not moved by airplanes but by trucks at a fraction of the cost. Can they house everything that one needs overnight ? No I dont think so. Can they house 60 percent of what they need. Probably. In any case I see this as a huge threat. International is a different story.
First off, there's still going to be a need to move freight by air -- especially express delivery. Amazon was only 2% of FedEx's business. eCommerce only makes up 13% of all logistic movements and Amazon owns roughly half of that 13%. FedEx is still growing because eCommerce is growing. However there is still the rest of logistic movements that aren't eCommerce. Currently with the trade disputes and slowed economies of Europe and China, the rest of the shipping sector is flat but it is going to come back. I don't know why everyone believes FedEx only moves eCommerce goods.
FedEx ignored Amazon for too long. FedEx/UPS were unable to supply Amazon's shipping demand. Why? Because their shipping is low yielding revenue and the last mile of shipping is very expensive. Fred Smith continues to say that it took FedEx 40+ years to build out their network and that there's no way that Amazon can do that in a fewer years. I disagree with him. Amazon has been in business for 25 years now. They're been building their model ever since then. And there now have warehouses near most of the population in the USA.
Amazon's problem is that it will see more and more competition. Walmart is no slouch. And nearly every brand has an online website to sell their stuff. In the USA, can Amazon significantly increase their market share? No. The majority of people who could use Amazon are already using doing so. If anything they stand to lose customers as the competition catches up.
On Cyber Monday of this year, Fedex estimated that they would move 33 million packages that day. Instead they shipped 37.8 million.
Should Amazon get into the business to business and other logistic models, then yes Amazon as a shipper will become a threat to FedEx. But, before that, UPS is at bigger risk as they rely on at least 10% of revenue from Amazon.
This quarter's earnings disappointment were caused by a host of reasons. However, if FedEx has a losing third quarter, then it is time to panic and question the board