FedEx: Amazon's new delivery service 'should not be confused as competition'

Key Points
  • FedEx's executive VP Rajesh Subramaniam said Amazon's new delivery service "should not be confused as competition with FedEx" during the company's most recent earnings call on Monday.
  • This isn't the first time FedEx downplayed Amazon's logistics threat.
  • Amazon continues to expand its own delivery network, and launched a new program called Delivery Service Partners that lets entrepreneurs run their own local delivery networks of up to 40 vans.
A FedEx delivery driver unloads packages from his truck in Lower Manhattan, June 2, 2017 in New York City.
Getty Images

FedEx isn't too worried about Amazon's continued expansion in delivery and logistics.

During FedEx's earnings call on Monday, the company's executive VP and chief marketing and communications officer Rajesh Subramaniam downplayed Amazon's logistics threat, saying it shouldn't be "confused as competition with FedEx."

"While there has been significant media interest in what Amazon is doing to expand their in-source delivery capability, this should not be confused as competition with FedEx," Subramaniam said. "The global infrastructure, the technology, the capabilities, knowledge that's needed to compete in our business is quite extraordinary, and we have built that up over 40-plus years."

Subramaniam's comment was in response to a question asking about Amazon's Delivery Service Partners, a new program designed to let entrepreneurs run their own local delivery networks of up to 40 vans. Amazon said each Delivery Service Partner can start a business with as little as a $10,000 investment and that successful partners could make up to $300,000 in annual profit.

Subramaniam added that Amazon is a "longstanding customer" of FedEx, and that no one customer accounts for more than 3 percent of the company's revenue. He also said Amazon and other customers have built their own in-house delivery network to deal with "capacity issues" — an explanation Amazon has made previously as well.

This isn't the first time FedEx downplayed Amazon's threat as a competitor. In 2016, as media reports suggested Amazon was getting serious about building its own delivery service, FedEx's former executive VP T. Michael Glenn said it would be a "daunting task requiring tens of billions of dollars" to build and replicate FedEx's existing delivery network. Earlier this year, FedEx management reportedly told a Bank of America analyst that it would be difficult for Amazon to "match FedEx's density."

Still, the market seems less convinced. Following a Wall Street Journal report that Amazon is preparing to launch its own delivery service in February, FedEx shares dropped almost 4 percent.

Besides the new Delivery Service Partners program, Amazon runs its own network of delivery trucks to handle a part of its package volume and launched an Uber-like delivery network called Flex as well.

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