FedEx's 'Commerce Platform' FDX competes with Amazon?

At the beginning of this year, FedEx announced the launch of a "commerce platform" in the third quarter, which feels akin to Hanjin in Korea suddenly announcing the creation of something like Coupang. Consequently, foreign media have continued to report on this development with headlines suggesting that FedEx is starting a commerce platform to directly compete with Amazon, questioning whether it can truly compete with Amazon. However, when we discuss FedEx's commerce platform, named fdx, it's apparent that it's not quite like Amazon.

Considering the history of conflict between FedEx and Amazon, the reporting behavior of these foreign media outlets is not incomprehensible. Amazon first made a move into the "last mile delivery" sector, which had been cooperated with FedEx, launching a direct competition. Furthermore, by 2023, Amazon had surpassed not only FedEx but also UPS, becoming the leading delivery company in the United States.

Upon examining the main features of fdx as outlined by FedEx, it seems more like a "logistics platform" than a commerce platform, given the numerous features related to logistics operations support. It might be that FedEx was actually more interested in creating a logistics platform.

Nonetheless, there are reasons to consider fdx as a "commerce platform." This is primarily because the first feature emphasized by fdx is "creating consumer demand." For a logistics company like FedEx, creating consumer demand is an entirely different capability, requiring effective marketing or a commerce platform to engage customers directly. How does FedEx plan to achieve this? Over the past few years, FedEx has been preparing a big picture strategy, indicating that the direction pursued by FedEx's commerce platform is different from Amazon's commerce platform.

● The ball Amazon launched: 'Last Mile Delivery'

Following UPS, FedEx, the second-largest last-mile logistics provider in the United States, announced at the beginning of this year that it would create a new data-driven commerce platform. In a way, this news might sound similar to Hanjin in Korea suddenly launching something like Coupang.

However, FedEx has been feeling a sense of crisis in the e-commerce field for quite some time, and Amazon symbolizes that crisis. Unlike Coupang in Korea, Amazon initially did not internalize its delivery organization but cooperated with logistics companies like FedEx. Entering the 2010s, it began expanding its delivery business by acquiring local courier services. In 2018, Amazon officially declared the last-mile delivery sector as a fiercely competitive business through official documents. In response, FedEx terminated its logistics service contract with Amazon in 2019.

Even then, the industry's assessment of Amazon, which was expanding its territory to all logistics, was lukewarm. Below is an excerpt from an expert interview published when Amazon was reported to be actively expanding its delivery services in 2018. The content primarily focused on the challenges Amazon would face in creating efficiency through its delivery system and directly competing with logistics companies like FedEx.

"It's a far-off story for Amazon to have the capacity to handle all its own deliveries. It's actually impractical to start competing with UPS and FedEx." - Scott Group, analyst at Wolfe Research, 2018 WSJ

"Logistics is too big of a business. Just because Amazon creates a new logistics option, it doesn't mean FedEx or UPS will be immediately scared." - Paul Thompson, Chairman of Transportation Insight, 2018 WSJ

Listening to their comments, it would seem like Amazon might only pose a challenge to FedEx in about 10 years. However, what has happened since then? Last November, the WSJ reported that Amazon had surpassed FedEx and UPS to become the company that delivered the most parcels in the United States in 2023.

According to the content, Amazon had already overtaken FedEx by 2020, and by 2022, it had also surpassed UPS to become the number one in the United States. Moreover, according to the WSJ, Amazon has recently been increasing its lead over UPS and FedEx. Five years proved to be enough time to work magic.

In this context, it's natural that the foreign media frequently mention 'Amazon' when reporting on FedEx's newly launched commerce platform fdx. Titles like 'Can FedEx compete with Amazon through fdx?' naturally follow.

● The reason FedEx is creating a 'commerce platform'

The name of the new commerce platform announced by FedEx is 'fdx'. The official launch is scheduled for this fall, and currently, it's available in a preview version only to companies that request it.

According to FedEx, fdx offers an end-to-end ecommerce solution for managing the customer journey of ecommerce companies, all within a single platform. This means that FedEx is not operating a commerce platform that sells products directly to general consumers like Amazon does. And from what FedEx has revealed about the platform's main features so far, it doesn't seem to be aiming to offer a solution for building online stores like Shopify does.

In fact, the main features of fdx as stated by FedEx are about providing visibility and data within the ecommerce value chain to support strategic decision-making for businesses.

It seems that the main features of fdx revealed by FedEx are more akin to those that a 'logistics solution' would offer. Given that FedEx has defined it as a platform that can help companies operating in ecommerce, it appears that anyone can connect their own store to fdx and use these features.

Furthermore, with the recent trend of platforms emerging that consolidate solutions to support the growth of existing ecommerce businesses, it might be necessary to take a broader view of what the term 'commerce platform' encompasses.

● What does 'Grow consumer demand' created by logistics mean?

However, there is one notable feature in fdx. Among the features fdx offers, the first highlighted is 'Grow consumer demand'. While other features mainly involve logistics data and operational support, which FedEx can adequately provide, connecting to new customer demand seems to be a different story. How can a logistics company achieve this?

To understand this feature, it's necessary to look at 'ShopRunner', a company acquired by FedEx in 2020 and became its subsidiary. Through the acquisition of ShopRunner, FedEx was able to secure consumer shopping data and customer touchpoints it didn't have before, preparing to provide commerce solutions beyond logistics.

ShopRunner is a unique concept of an ecommerce paid membership service (free for American Express cardholders) and platform. When consumers become members of ShopRunner, they can receive various discounts as well as free 2-day shipping and free return shipping when purchasing from partner ecommerce malls connected to this platform. These partner ecommerce malls include 'hundreds' of retail brands as shown in the image below.

Thus, ShopRunner can be seen as a coalition platform where ecommerce brands that offer the convenience of FedEx's logistics services gather. Through this, we can predict such a scenario: a sports fashion brand affiliated with ShopRunner, 'Under Armour', can naturally access the customers of another American classic fashion brand affiliated with ShopRunner, 'Cole Haan'. Conversely, it's entirely possible for Cole Haan to expose its products to Under Armour's customers.

The background to FedEx announcing it connects 'ShopRunner members' as a means of creating consumer demand lies here. fdx has already integrated the functionality of ShopRunner. It allows the corporate customers using fdx to naturally become affiliates of ShopRunner, enabling access to ShopRunner membership customers.

Although the recent number of ShopRunner members has not been disclosed, according to Digital Commerce 360, it had 10 million members as of 2019. Four years have passed since then, and with the M&A with FedEx, it's reasonable to assume that this number has increased even more.

Interestingly, ShopRunner operates a service that provides a kind of 'commerce solution' as a benefit to its affiliated brand partners. Benefits like the ones below are possible because ShopRunner collects various data, including user behavior data, purchase history, shipping times, and return rates. It remains to be seen whether related features will be added to FedEx's commerce platform, fdx, in the future.

Services provided by ShopRunner to its affiliate partners:

1. Customer Segmentation: Analyzes ShopRunner users' purchase patterns, preferences, and behavior data to segment customers into various groups, allowing for the development of tailored marketing strategies.
2. Recommendation System: Uses machine learning algorithms to provide customers with personalized product recommendations.
3. Logistics Optimization: Offers advanced analytics and predictive modeling to optimize shipping times and costs. Partner companies can choose faster and more economical shipping options here.
4. Customer Churn Prediction: Predicts the likelihood of customer churn in advance. This allows companies to prevent customer loss and develop new promotional plans for maintaining long-term customer relationships.

Condensing the 'solutions' accumulated over time, the recently announced FDX by FedEx can be seen as an integrated platform of various logistics and commerce solutions that FedEx has been preparing. In addition to ShopRunner, FDX includes major solutions developed by FedEx, one of which is 'FedEx Surround'.

FedEx Surround is a service that allows for the tracking and monitoring of 'logistics visibility'. This service provides visibility throughout the delivery process through real-time data analysis, offering predictable logistics services to users, namely the shipping companies. It goes beyond simply checking 'where my package is currently passing through'. It includes services that allow for control measures in case of sudden risks. For example, if pirates appeared in the Red Sea due to the impact of the Israel-Hamas war, blocking the European route through the Suez Canal, it would suggest alternative routes quickly.

While Amazon also has the capability to predict various risks in the supply chain and adjust routes internally, this information is only accessible and usable by Amazon. Sellers or vendors selling on Amazon cannot intervene or make real-time decisions. In contrast, FedEx Surround allows sellers to directly look into the data and respond to issues, clearly differentiating it from Amazon.

Additionally, FedEx offers solutions like 'FedEx Freight' for businesses needing to ship large volumes of goods, and 'FedEx Delivery Manager', which allows consumers to adjust delivery times or change delivery locations. These features are also incorporated into FDX. Therefore, it wouldn't be an exaggeration to say that FDX is a 'comprehensive gift set' that allows the use of various solutions developed by FedEx on a single platform.

● Is there really a need for FedEx to compete with Amazon?

At the outset, following the announcement of FedEx's FDX, many international media outlets predicted a direct competition between FedEx and Amazon, suggesting that Amazon had expanded into logistics just as FedEx had ventured into Amazon's territory with a commerce platform.

However, as you might have gathered from reading thus far, FedEx does not seem to intend to directly compete with Amazon through FDX. They haven't created an e-commerce platform like Amazon's, and it doesn't seem necessary for FedEx to become another Amazon at this point. What's important for FedEx is business growth, not specifically defeating a competitor.

From this perspective, FDX appears to be a kind of integrated digital solution designed to conveniently provide FedEx's core business of 'logistics' to a wide range of e-commerce company customers, regardless of whether they use Amazon's logistics or not. Especially since the key features of FDX are tailored for 'global' needs, it could be a very useful tool for the growth of sellers and brands. One of the barriers that has long hindered many brands and sellers from going global is 'logistics'.

FedEx has enhanced its logistics capabilities, which alone might not cover all necessary commerce data and solution capabilities, by acquiring external companies with commerce operational capabilities like ShopRunner. As a result, FDX goes beyond being a logistics platform that contains various logistics solutions to potentially being proclaimed a 'commerce platform'.

The boundaries between the logistics and e-commerce industries are blurring, so much so that an explanation might not be necessary. Companies that focus solely on logistics or e-commerce may fall behind the ambitious ones. There should be no limitations in constantly finding opportunities for growth within one's domain. I believe that today's story about FedEx will not feel like someone else's business to the readers from the logistics and commerce industries in Korea.

※ This content was produced based on a partnership between Connectors and 'Daily Trend'.

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