Chinese couriers may love it but the idea of drones doesn’t fly with FedEx
PUBLISHED : Sunday, 01 May, 2016, 7:28pm
UPDATED : Sunday, 01 May, 2016, 7:28pm
FedEx, the world’s biggest express delivery company with more than 600 planes, is not too hot on the idea of drone delivery even though some Chinese companies including SF Express and Taobao are toying with the idea.
“The thing with drones is that they’re very good at catching headlines. But the challenge...is how you take a neat gadget and make it a technology that is sustainable, scalable and delivers real benefits to the customer,” FedEx’s Asia-Pacific president Karen Reddington told the South China Morning Post. “And it’s gotta be significant customer needs (before we invest in this).”
China’s express delivery market has been growing at more than 30 per cent for the past few years, replacing the US as the world’s biggest by volume, thanks to the e-commerce boom.
In FedEx’s home market of the US, e-commerce platform Amazon has come to be seen as a competitor rather than a customer for FedEx and its peer UPS since Amazon started leasing planes itself and bought a stake in freighter lessor ATSG in March.
Reddington shrugged off the idea of Amazon or its Chinese counterpart Alibaba as threats.
“Some of the speculation has been overblown. Their business is focused on e-tailing or Web services or cloud computing services. Even as a bricks-and-mortar retailer, [Amazon] always had some of their own distribution,” she said. “We operate one of the biggest airline fleets in the world. It takes time to replicate that model.”
FedEx’s younger competitors in mainland China are racing to do exactly that. Express delivery firms such as SF Express and YTO Express are building a growing fleet of freighters for their own newly established cargo airlines, which Boeing expects to be its biggest freighter customers for the next 20 years. Their rapid growth since coming into existence in the 1990s has helped them take market share from the state-owned postal service as well as foreign players like Fedex, which entered China as early as 1984.
Reddington declined to reveal FedEx’s market share in China, but according to a joint report by Deloitte and China’s state postal bureau on the country’s express market in 2014, foreign firms combined only have 1.2 per cent of the total business volume, though they account for 12.3 per cent of the income as they focus on the high-end cross-region and international delivery business.
“There will always be local providers. The real thing that differentiates us is our ability to bring a global network to bed,” Reddington said.
FedEx is waiting for Chinese anti-trust approval for its acquisition of Netherlands-based TNT. The US$5 billion deal has been given the green light in the US and the EU. Reddington said she has confidence in getting the approval and sees the deal closing in the next two months, which would strengthen its network between Asia and Europe.
Unlike rival DHL, which has chosen to crack the China market by buying into Sinotrans, one of the biggest state-owned logistics companies, FedEx does not have any joint venture partners in China. Reddington declined to say if it is considering one, but said any potential candidate would have to “fit in with our capabilities”.
She said she is not worried the Chinese express sector is expected to suffer from the kind of oversupply that has been plaguing the larger industry of air cargo. “The fact that one-third of China’s retail is now done through e-commerce gives us confidence that there will be sufficient demand,” she said.
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