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3/17/2016 11:50:00 AM Write a Letter to the Editor Write a letter to the Editor

FedEx CEO Calls Amazon Challenge Reports 'Fantastical'

FedEx CEO Fred Smith by Aaron M. Sprecher/Bloomberg

When FedEx Corp. CEO Fred Smith looks at, he sees a valuable customer — not a mortal danger.

A major competitive threat from Amazon to FedEx or UPS Inc. is unlikely because the online retailer would have to invest tens of billions of dollars and years of effort to build a delivery network, Smith said March 16. Instead, Amazon is seeking better control of its inventory and “last-mile” shipments to customers, FedEx said.

“Concerns about industry disruption continue to be fueled by fantastical — and I chose this word carefully — articles and reports,” Smith said on a conference call with analysts and investors. “In all likelihood, the primary deliverers of e-commerce shipments for the foreseeable future will be UPS, the U.S. Postal Service and FedEx.”

Amazon last week said it would lease 20 Boeing Co. 767 freighters, building on the more than 70 fulfillment centers and 23 sorting facilities it has developed. The company’s leasing plans have spurred some analysts to speculate that it would seek to build its own delivery network.

Amazon spokeswoman Kelly Cheeseman declined to comment.

FedEx and its rivals hold advantages in the density of their networks and the revenue they earn per stop, Smith said. On that basis, Amazon won’t be able to compete.

“We’re not delivering from 50 fulfillment centers or 100 stores,” Smith said. “We have the capability to pick up, transport and deliver an item from 95% of the human beings on the planet, much less every business in the world, within one to two business days, door to door, customs cleared.”

Amazon has been a FedEx customer for years, and the shipping company expects that to remain the case “for many years to come,” said Mike Glenn, a FedEx executive vice president. The companies are in constant dialogue, he said, and FedEx is well aware of Amazon’s desire for more capacity to manage inventory. Other major retailers have long held that ability, he said.

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By Mary Schlangenstein
Bloomberg News

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