FedEx Corporation (NYSE:FDX) CEO, Fred Smith is clearly unimpressed by the attempts of Amazon.com, Inc. (NASDAQ:AMZN) and Uber to compete with the global delivery giant. Smith downplayed the new service Amazon has in works to let non-employees deliver packages without him identifying the technology giant by name. He does not perceive a long-term threat to FedEx from large technology companies such as Amazon and Uber coming into the fray.
Amazon’s pilot program with the in-house name “On My Way” would hire urban retailers to stock up packages. Then, ordinary folk looking to make some money by delivering packages could utilize an app to determine where to collect and deliver goods in the midst of their daily activities. The Amazon model is akin to other crowdsourcing firms, such as Uber or Postmates, which are endeavoring to provide speedy, economical delivery services at the local level.
According to Smith, research has repetitively proved that customers prefer and trust uniformed deliverers with proper credentials. Also, it is paramount that the customer experience be consistent. New entrants face a host of monumental challenges to compete effectively with delivery giants such as FedEx. Hence, Amazon is quite confident about their market strategy for the present as well as the near future.
Currently, Uber Technologies and Amazon.com are experimenting with new strategies to get a foothold in the package delivery industry. However, FedEx’s executive vice president of market development, T. Michael Glenn, says that people who hold the view that tech firms can make it big in the package delivery space are unaware of the fundamental costs that come with any delivery.
He opined that most people have no idea of the fundamental input cost on pickup and delivery. The latter is unchanged despite technology making aspects such as user interfaces simpler and intuitive. According to Mr. Glenn, it is exorbitant to establish a delivery network, pretty complex to develop technology to operate the same and takes considerable amount of time to reaching any significant size. He added that establishing a shipping network is very capital intensive that coupled with the highly sophisticated information technology required pose formidable hurdles to entrants.
Other players in the delivery industry are startups such as Instacart and interestingly Google Inc (NASDAQ:GOOGL) too in the race via Google Express.