Fedex and the termination of the relationship with Amazon

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

When we are faced, as in this case, with Amazon which represents both the seller and the logistics partner even if the real seller is the shop “X”, but everyone knows and recognizes… Amazon! ... so much so that he also started making products under his own brand or under his "aegis".

He is therefore one of the interlocutors, the most important, the one who has the real keys to access the market, has a predominant position in the relationship and therefore can "impose" his own technical and economic conditions, for which the seller of the single shop that operates through this type of supply chain risks having to be satisfied with the margins induced and governed by something else.

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

In this price war, the erosion of margins for those who sell is often the first cause of failure of their business!

The many beautiful electronics companies and not only that have jumped in recent years for not having been able to contain the tsunami brought about by the advent of the various e-marketplaces know something about it.

It is clear that, when the price is aligned downwards and the competitors do not all have the same purchasing potential, the same commercial conditions (etc. etc.), someone, not to say many, falls short of margins.

You cannot act on logistics and you cannot review your relationship with the marketplace… you can only think of continuing to do a price battle until the resulting margins manage to sustain everything.

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

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

You ask yourself, why? The answer is simple: because Amazon is now too big for any type of company and the balance of power is far unbalanced towards it, which means low margins for delivery work and too stringent working conditions.

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

This news has seen many comments on the net because it seems to have something incredible… but that's what would happen to anyone sooner or later.

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

This means that even those who think of making their fortune or investing their future in selling through the portal of the same name, are very wrong.

One thing is certain: when you give up such important turnover, revenues are not the problem because the revenues are huge but the resulting margins do not compensate for all the efforts…. we return to invite you to read this interesting post where there are also all the numbers pitted and give a very good idea.

In this case the problem is twofold: it is obvious that every major logistics operator has the main ambition to include the best and largest customers (and therefore also Amazon), but if you then realize that the ratio in % between efforts, generated and resulting marginality, is to say the least small, you should make some reflections; if, as is happening, Amazon also becomes a logistics operator in its own right and therefore, potentially tomorrow, also a competitor on the market, reflections can and must become actions!

This was the case with FedEx which let go.

Someone will now take his place, perhaps even under pejorative conditions, but let us ask ourselves WHY a giant like FedEx has given up such an important customer…. And it is certainly not for lack of desire for growth.

All this must teach us a lot and make us ask ourselves "who is wrong what", then we must stop and reflect.

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

Have you thought about selling through Amazon? Well, in our humble opinion, be careful if you don't want to waste time and resources!

Better something created to your own size, on which to invest over time but which still remains yours.

So don't keep printing flyers just because you've always done this, don't keep renewing useless customer loyalty programs just because everyone does!

It's time to take the initiative!

When to evolve and start making truly targeted investments to protect what is our true asset, that is, our customers?

All chapters of: Loyalty 2.0

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