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VOL. 130 | NO. 54 | Thursday, March 19, 2015

FedEx Founder Says No Concerns About Uber Drift To Logistics

By Andy Meek

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Popular ride-sharing service Uber has hinted it may eventually expand firmly into the logistics sector. It’s a straight line, the thinking goes, from delivering people between destinations to eventually ferrying packages from one point to the next.

FedEx chairman and founder Fred Smith’s response? To paraphrase what he told analysts Wednesday during FedEx’s quarterly earnings presentation: Uber is not and most likely never will be a logistics competitor.

One analyst put the question to Smith directly about what he thinks of Uber's logistics potential. At the end of 2014, for example, Uber hired the former head of Google’s nascent same-day delivery service. Uber also has dabbled with a messenger service in New York City, as well as delivery of household goods and food in other markets.

Last summer, Uber CEO Travis Kalanick even told Bloomberg that Uber’s move into logistics is probably a natural evolution, with the caveat the company is still early in its analysis of that market.

Still, Smith had this to say on Wednesday's call:

“There's a great country and western song called ‘I was country before country was cool.’ We were Uber before Uber was there in our custom critical.

"Custom critical is a business that moves things from point A to point B as fast as you possibly can. And it's done with, in essence, an app, but mostly through voice connections. And we also have, I think it's in 23 markets now, FedEx SameDay City, which is a part of the FedEx office operating unit.”

Smith went on to explain that the pure “goods moving business,” referring to the need to move small things as quickly as possible between points during the same day, is a much smaller market than moving things to ship according to the patterns of, for example, traditional e-commerce shoppers. A big piece of that market, Smith explained, involves orders processed after 8 p.m. through midnight.

“Uber is a great company, and a great concept,” Smith said. “I use Uber, and I had occasion to use it up in Cincinnati not long ago, when I was up there. And it's terrific. And I think where the shoe fits, there's certainly some demand for moving a package across town. And Uber or Lyft, or the taxi services that have been in business for a long time, have been able to do that, or some of the local same-day businesses.

“But I think there's just an urban mythology out there that the app somehow changes the basic cost input of the logistics business, or changes the circadian patterns, or the underlying business situation. And that's just not ... that's just incorrect. So great company, great concept, but I don't think it's a major – likely to be a major player in the logistics business.”

It’s not an unfamiliar position for Smith, who in late 2013 similarly pushed back against the perception of drone-based package delivery that Amazon had then inserted into the zeitgeist.

In a 60 Minutes interview, Amazon founder Jeff Bezos took the lid off a secret Amazon project – the development of drones that could eventually traverse the so-called “last mile” and carry packages straight to customers’ doorsteps. During FedEx’s next earnings call with analysts following that Bezos interview, though, Smith explained that package delivery is actually more complicated than suggested by the notion that drones could enter the picture en masse.

In his comments then, Smith poked at everything from the maximum range of drones to weight limits on what they can carry. It was a moot point, though, because last month, the Federal Aviation Administration proposed new rules that, if implemented, would effectively kill a drone delivery program as envisioned by Amazon before it ever took flight.

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