Despite all the rumours swirling about Amazon’s in-house shipping network that could potentially rival FedEx or UPS, FedEx doesn’t see it as a big threat at this point.
During its earnings call on Wednesday, FedEx’s executive VP Mike Glenn addressed investors’ concerns around Amazon’s growing shipping ambitions, stressing that relations between FedEx and Amazon continue to be “close.”
“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 said that the two companies remain in close dialogue to better understand how they could help each other around shipments. Amazon outsources most of its shipping needs to companies like FedEx and UPS. Maintaining close ties with FedEx and UPS is key for Amazon, which is seeking to keep a lid on escalating shipping costs.
Another big reason Amazon’s own shipping network doesn’t worry FedEx as much: the revenue coming from Amazon is small relative to FedEx’s total sales.
“Having said that, it is important to remember that no single FedEx customer represents more than approximately 3% of total revenue,” Glenn added.
There have been multiple reports recently indicating that Amazon is growing its own shipping network, including its secret plan to build a global delivery network that would possibly reduce the need to go through DHL, FedEx, and UPS. Amazon has also gotten more directly involved in shipping by buying a portion of aircraft leasing network ATSG in March, and signing a leasing deal with Atlas Air in May.
In fact, a number of Wall Street investors believe Amazon is serious about launching its own delivery network, and it’s only a matter of time before it grows into Amazon’s fourth largest business.
“Shipping as a Fourth Pillar for Amazon will be either an obvious option or an obvious reality,” RBC Capital’s Mark Mahaney wrote in a recent note.
Disclosure: Jeff Bezos is an investor in Business Insider through hispersonal investment company Bezos Expeditions.
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