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Fred Smith, CEO of FedEx, doesn’t seem too worried about the prospect of Amazon expanding its own delivery network, saying that it poses a bigger threat to the United States Postal Service.

“Amazon is a good customer. We think they’ll be a bigger customer in years to come if they continue to grow and they certainly should,” Smith said at the Bloomberg New Economy Forum in Singapore. “The biggest single entity that will lose traffic as Amazon puts out its contractor delivery force is U.S. Postal Service.”

Smith also discussed the impact of the China trade war on FedEx operations.

“A lot of our customers are telling us they’re looking to shift some of their supply chains to Vietnam and Thailand, away from China. Some of them are trying to ship a lot of product in advance of the peak season so they avoid tariffs.”

FedEx CEO not worried about Amazon as competitor
Credit: Zain Saleem

Smith added: “You can’t just move a factory to Vietnam. I think at the moment there’s more talk about it and advanced planning and everybody’s hoping the tariff dispute will get resolved.”

However, Smith said the whole thing is more complex than people like to think, suggesting that businesses like FedEx will adjust.

“Remember, Fedex goes everywhere. We fly all over the Pacific. As we’re sitting here speaking today there are nine 777s or MD-11s going eastbound across the Pacific and the same number coming back. We serve all of the countries we just talked about. And China’s a huge and important market for us.

“But in terms of our overall tariff-eligible revenue it’s about 2.4% of our revenues. Hong Kong’s a little bit more but it’s got a different regime on the tariffs. But we take things to and from China from a lot of different places… Europe, South East Asia, Australia, Japan.”

Smith said FedEx would “hopefully” make up any lost revenue from business in these other regions.

Source: Bloomberg

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