Video is exclusive to members, sign up now to enjoy this and many other features.

Amazon vs Fedex

Former VP, Amazon Logistics Europe

IP Interview
Published on August 8, 2020

Why is this interview interesting?

  • How Amazon will be looking at the decision to insource delivery versus working with carriers in the US and EU
Executive Bio

Philippe Hemard

Former VP, Amazon Logistics Europe

Philippe has spent over 25 years developing end-to-end logistics systems from vendors to customers, including 18 years at He joined Amazon in France in 2000 as Distribution Centre General Manager, moving to (Scotland) in 2004, to support business growth within the UK. Philippe then took up several senior leadership positions in European Operations at Amazon EU Headquarters in Luxembourg, culminating in the role of VP Amazon Logistics Europe from 2015-18. Before joining Amazon, Philippe worked for Danzas (now DHL) in France. Throughout his career he has worked on network modelling, procurement and buying processes, inventory management, fulfillment management, and transportation network management. Since March 2018 Philippe has run his own consultancy business, holds several board positions and teaches Supply Chain Management and Global Logistics Strategy at university.

Interview Transcript

How do you look at the challenge of Amazon owning the last mile, in the US, versus FedEx and larger players, versus Europe?

It’s difficult to call out. Today, Amazon still doesn’t have the network to cover the full US anyway and it will take a long time to achieve that. You have the question about the density and the location where Amazon deploys. My belief is, the smart way would be to still keep both. If you consider the less dense areas of the country – within the US and Europe, it’s the same; within countries in Europe, it’s the same – at a certain point, there is a density at which you there is no benefit to going on your own. It’s better than one carrier goes and does the job for all the people selling in this area. This would have the best cost. Every retailer would have to accept the cost of it.

But the opposite applies, as well. When you take the big cities, they are very, very dense and there is a level at which adding more parcels doesn’t help. There is a level of density which is pretty high, but you could have more. But there is a time where even if a guy was delivering in his own area, without taking his car or truck back, he will still need the time to take the parcel, go to the door, ring the bell and stuff like that. At the level there, you could have more and the benefit is almost nothing. In that case, work with both, basically. Today, Amazon works with both, even in the areas where they are. If, for some reason, they are beyond this density, they may give the work to another carrier. They don’t want to set a new route and split the route in two as there is a scale effect. For example, if you have a good route, where you can deliver 200 parcels in a day and you are there for eight hours, that is a very, very good route. But if you are down to 50, you are struggling. Therefore, it’s better to give the 50 to another carrier, which may help their density and doesn’t impact yours, because you know you are maxed out at 200. If you have 400, you will keep the two routes.

If you want to be optimized all the time, you need to manage this. In that case, you will always need a partner to do it. I believe, for the Amazon business, the best way for carriers such as UPS and FedEx, is to really work in partnership with Amazon, understanding where they will be needed and, obviously, adapt their rate to that. But Amazon will not do better. One of the follies, for example, in the low density area, is that there will be a rate that will be more expensive than the high density and Amazon will have to accept paying more to those carriers, to do it, which ultimately, should have a better cost than Amazon would, because Amazon plus all the other parcels will always be better than just Amazon alone.

How do you see this relationship evolving, between the two, over the next decade?

I think, maybe one or two will drop. In the US, there is UPS which is there. Of course, there may not be enough room for everyone. I think FedEx have already given up a bit, with Amazon in the US. I believe there will be room for one or two, per country, with whom we work in partnership. When I say in partnership, that doesn’t mean agreeing. It’s just making sure you are giving them the right number of parcels, where you don’t deliver. We did it in the UK, back in 2015, 2016, when Amazon Logistics was already big in the UK. We’re working very closely with DPD, in the UK, for example. Of course, this business, as you develop the network, will not grow extensively. However, remember that Amazon are still doing 15% to 25% growth, depending on the region. So every year, Amazon adds a quarter to its existing business. Ultimately, every year, you get a little bit more, despite your share decreasing, for some of the business. I don’t think Amazon will do a great percentage of their own parcels, because economically, it will not work.

If, in a country, every carrier decides not to work with Amazon, for whatever reason, yes, maybe Amazon will do and it won’t be optimized for the 10% to 15% where they will never have the density. But they will do it themselves. For the country where a carrier is smart enough to say, okay, I know I’m not going to have the best parcels, in the middle of the city, but I work in partnership and they give me a pretty accurate forecast and they guarantee me at least a certain level of business and I will work around that. I think people will still be able to grow their own business. Now, it will never be as good as it was, many years ago, except for one thing. If you compare the long range, I can tell you that Royal Mail is doing more parcels today, with Amazon, than they were doing in 2005. Okay, it was 15 years ago but, despite the fact that, in 2005, Royal Mail was 90% of the Amazon business, today they’re maybe 20%. But that’s not what matters. What matters is the total parcels they’ve been given and I’m sure, today, they’ve been given more parcels than they were, at that time.

That’s what some carriers should think about. Of course, they lost a lot of opportunity, but they’re still growing their own business.

Sign up to test our content quality with a free sample of 50+ interviews

Copyright Notice

This document may not be reproduced, distributed, or transmitted in any form or by any means including resale of any part, unauthorised distribution to a third party or other electronic methods, without the prior written permission of IP 1 Ltd.

IP 1 Ltd, trading as In Practise (herein referred to as "IP") is a company registered in England and Wales and is not a registered investment advisor or broker-dealer, and is not licensed nor qualified to provide investment advice.

In Practise reserves all copyright, intellectual and other property rights in the Content. The information published in this transcript (“Content”) is for information purposes only and should not be used as the sole basis for making any investment decision. Information provided by IP is to be used as an educational tool and nothing in this Content shall be construed as an offer, recommendation or solicitation regarding any financial product, service or management of investments or securities.

© 2024 IP 1 Ltd. All rights reserved.