FedEx's Dilemma: living in a low-margin world

Supply Chain
Written By Rick Watson

There's still a lot being written about FedEx's decision to ditch Amazon as a customer.  But I think most of the articles miss the point.  One point I will explore here is how FedEx will need to shift their model to work in a lower-margin environment.

History will show it either as a big nothing-burger (FedEx grows faster) or as a strategic mistake because this isn't a winner take all market.

I'm not an expert on FedEx but from my point of view the company has always valued profitability over other players in the space.  The company is not unionized, in stark comparison to UPS, and the government-pensioned USPS.

So logically, it makes sense to me that this has been brewing for some time - FedEx not happy with the low rates and profitability of Amazon routes.

But you know who is the original master of driving down supplier prices?  The other company they are welcoming with open arms -- Walmart. 

Regardless of Walmart or Amazon, FedEx's key strategic challenge is this:  It has to learn to live in a low-margin world.

Rick Watson

Rick Watson founded RMW Commerce Consulting after spending 20+ years as a technology entrepreneur and operator exclusively in the eCommerce industry with companies like ChannelAdvisor, BarnesandNoble.com, Merchantry, and Pitney Bowes.

Watson’s work today is centered on supporting investors and management teams incubating and growing direct-to-consumer businesses. Most recently, in partnership with WHP Global, Rick was a critical resource in architecting the WHP+ platform, a new turnkey direct to consumer digital e-commerce platform that powers AnneKlein.com and JosephAbboud.com.

Watson also hosts a weekly podcast, Watson Weekly, where he shares an unbiased, unfiltered expert take on the retail sector’s biggest players.

In the past year alone, Rick has spoken at many in-person and virtual events as well as podcasts on topics ranging from retail/ecom to supply chain/logistics and even digital grocery including CommerceNext IRL, ASCM Connect, and Retail Innovation Conference.

https://www.rmwcommerce.com/
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