Fedex And the termination of the relationship with Amazon

Here we come to the point that we announced ... BEFORE TALKING ABOUT SOLUTIONS we need to be clear about all our problems, the aspects on which we need to improve, be clear about the competitive scenario within which we are placed, and, in our view, we need to start by being clear about one thing:
when we talk about e-marketplaces, so for example Amazon, all the efforts we have to make must be included in the final price we are going to charge, such that it satisfies all the contractors (industry that produces, distribution that supports in logistics and seller that sells directly or, as in this case with a Marketplace, as a conduit).

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marketplace 01

When we are faced, as in this case, with Amazon representing both the seller and the logistics partner even though the actual seller is “X” store, but everyone knows and recognizes … Amazon! … so much so that it also begins to make products under its own brand or under its “umbrella.”

It is therefore one of the interlocutors, the most important one, the one that has the real keys to access the market, has a predominant position in the relationship and therefore can “impose” its technical and economic conditions, so the seller of the individual store operating through this type of supply chain, is likely to have to make do with margins induced and governed by other.

We keep repeating that while the purchasing power of different stores is certainly, in general, different from each other, the market price, to which all must align (downward because of obvious competition), is the one that must be able to determine the margins of those who sell and who cannot choose to do otherwise.

In this price war, margin erosion for sellers is often the first cause of failure of their business!

The many fine companies in electronics and beyond that have jumped, in recent years, for not being able to contain the tsunami brought about by the advent of the various e-marketplaces know something about this.

Clear is that, when the price is aligned downward and the competitors do not all have the same buying potential, the same business conditions (etc. etc.) some, not to say many, go into margin shortfall.

You can’t act on logistics and you can’t revise your relationship with the marketplace … you can only think about continuing to do a price battle as long as the margins arising, manage to sustain it.

All this, in the long run, generates a problem … a big problem!

fedex

FedEx, one of the largest logistics operators in the world and, of which, it cannot be said that it is not large, competitive and resourceful, given also its numbers (more than $68 billion turnover, 400,000 employees, 160,000 vehicles and 657 aircraft, i.e., the third largest fleet in the world, after Delta Airlines and American Airlines) has decided, in 2019, to end its strategic partnership with Amazon.

You may ask, why? The answer is simple: because Amazon is now too big for any kind of company and the balance of power is far out of balance against it, which means low margins for delivery work and overly stringent working conditions.

In this regard, we recommend reading this interesting article in Fortune Italia on why FedEx has decided to abandon Amazon.

This news has seen a lot of comments online because it would seem to have like unbelievable … but that’s what would happen to anyone sooner or later.

Amazon becomes unmanageable for any company, it grows too much in volume, and the resulting margins are definitely stringent for everyone.

This means that even those who think they are making their fortune or investing their future in selling through the portal of the same name are sorely mistaken.

One thing is certain: when you give up such large turnovers, revenues are not the problem because the revenues are large but the margins derived do not compensate for all the efforts …. we go back to invite you to read this interesting post where there are also all the numbers pitted and they make the point very well.

In this case, the problem is twofold: obviously, every major logistics operator has as its main ambition to count the best and biggest customers (and thus also Amazon), but if you then realize that the % ratio between efforts, volumes generated and margins derived, is meager to say the least, you better do some reflecting; if then, as is happening, Amazon also becomes a logistics operator in its own right and thus, potentially tomorrow, also a competitor in the market, the reflections can and should become actions!

This was the case with FedEx dropping out.

Someone will now take his place, perhaps even on worse terms, but let’s ask ourselves WHY a giant like FedEx gave up such an important customer …. And it is certainly not for lack of desire for growth.

All this must teach us a lot and also make us wonder “who is doing what wrong,” then we must stop and reflect.

Isn’t it that what is happening with transportation will also happen with vendors? What will be the implications of those 243,000 references that Amazon has decided to put under its own brand?

fedex

Have you considered selling through Amazon? Well, in our humble opinion beware if you don’t want to get to a loss in time and resources!

Better to have something created to your own specifications, which you can invest in over time but still remain yours.

So don’t keep printing flyers just because you’ve always done it that way, don’t keep renewing useless customer loyalty programs just because everyone else is doing it!

It’s time to take the initiative!

When do we evolve and start making truly targeted investments to protect what is our real asset, namely our customers?

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