Amazon often gets the credit (or blame) for derailing industries — like bookstores or clothing retail — when it steps onto their turf.
Now that Amazon is building its own shipping fleet, investors are wondering what it means for FedEx and UPS.
Amazon has said it will lease 40 Boeing cargo aircraft from Air Transportation Services Inc. and Atlas Air Worldwide. That could allow the online mega-retailer to handle between 20% and 30% of its cargo volume independently, a according to a report by Moody's.
The question of what this means was put to FedEx's Vice President of Market Development Michael Glenn during its earnings call on Tuesday. And the answer was, in a nutshell: Don't worry about it.
Glenn noted that Amazon accounts for just 3% of FedEx's revenue. (It's a larger chunk of UPS', according to Moody's.) So losing the entire Amazon business — which is unlikely — wouldn't be devastating.
"Because of our close relationship with Amazon and close collaboration, we have a very clear and specific understanding of their needs across the FedEx portfolio during fiscal year 2017, and further, we expect them to be a significant customer for many years to come," Glenn said.
Glenn also addressed Walmart, whose big bet on two-day delivery is the largest attempt yet by a major retailer to take on Amazon's Prime service. The new Walmart plan would rely on regional carriers to provide last-mile delivery and skip the need for national ones.
But while Glenn agreed that FedEx could lose a small percentage of its business with Walmart, he said he still expected the overall partnership to grow — along with the rest of the e-commerce landscape.
"The fact of the matter is regional carriers simply don't have the scope and the scale to be able to compete with the networks that make up 95% of the e-commerce shipments in the US," Glenn said.
"So thoroughly there's a role for regional carriers, but they cannot compete, in our opinion, with FedEx over the long haul."
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