Will Amazon Buy FedEx

The population center of the United States is a small place called Pike County, Indiana. A population center differs from a geographic center by using (in the US) the decennial census to determine the point on the map where half the population sits equally on both sides. As of the 2010 census that puts over 150 million residents on each side of Pike County.

Population centers are important for determining resource allocation. For instance, if a company wanted to create a US air freight operation it would be wise to headquarter it as close to the population center of the US as possible. This is exactly why DHL, FedEx, and Amazon Air all have freight hubs at Cincinnati/Northern Kentucky International Airport — about 150 miles away from Pike County, Indiana.

For what it’s worth DHL, FedEx, and UPS also have operations 400 miles away from CNK at Memphis International Airport. These hubs allow for the passage of millions of tons of cargo each year. The logistics networks operating out of these airports are the reason our packages get delivered at all.

While everyone contemplates the future of drone enabled last mile delivery networks, the real battle for speed, pricing, and efficiency is taking place at our airports. Amazon is still a small player in the freight and delivery logistics business. With 40 jets (soon to be 50) their fleet is dwarfed by FedEx’s 670 planes currently in service.

If Amazon wants to stay competitive it’s going to have to directly battle or acquire a major shipping and logistics company. Unfortunately for small and independent businesses, FedEx with their 18 hubs worldwide and 2016 acquisition of TNT is a prime target to help Amazon reach its ambitions. While FedEx under Amazon would have to continue providing normal shipping services, the prospect of tighter integration would likely force many businesses to (paradoxically) work more closely with Amazon’s marketplace in an effort to defend themselves from it.

Additionally, the recent declaration in Amazon’s 2018 filing that it competes against logistic and transportation companies is not a good sign. Logistic businesses are notoriously difficult to start up and the acquisition of one of the largest players would be a massive blow small business. Regardless of a deal, Amazon’s shipping and logistics ambitions should be at the forefront of every business owners mind.

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