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FckdEx 🚚

Scott Galloway@profgalloway

Published on December 20, 2019

7-min read

In the next 24 months, FedEx will either be acquired or lose an additional 40%+ in value. The likely acquirer is Walmart. The gangster move: a merger with Shopify. 

In July 2017 we predicted, “If Bezos tomorrow said, ‘We see overnight delivery as a huge opportunity,’ the $150 billion of market cap of DHL, FedEx, and UPS would begin leaking to Amazon.” 

This has happened. Since the launch of Amazon’s delivery service in February 2018, FedEx has lost $25 billion (39%) in value, despite the S&P’s 24% gain. Amazon has added $240 billion (33%). In less than two years, Amazon captured nearly one-fifth of the market for e-commerce deliveries in the U.S. 

Since 2014, U.S. e-commerce has increased 84%, creating a massive opportunity for the delivery industry. But instead, there has been a transfer of wealth from FedEx, UPS, and the U.S. government to Amazon. Amazon enters high-friction, low-margin businesses as a means of differentiating low-friction, high-margin businesses (AWS and AMG).

How We Got Here — Featurizing 

Network effects, cheap capital, idolatry of innovators, and a feckless DOJ/FTC have resulted in a monopoly era where a wildly profitable business (phones, digital marketing, loyalty programs, cloud, Yoda dolls) can generate such staggering value (“antimatter”) that entire industries become loss leaders (“features”) to differentiate and protect the antimatter. Netscape, the fastest-growing software firm in history, went from antimatter to feature when Microsoft began bundling Internet Explorer with Office. 

I served on the board of a visual commerce SaaS firm (Olapic) until we sold for $130 million in 2016. There was a great deal of discussion on whether to sell. I urged the founders, naturally optimistic about the firm’s prospects, to sell. The difference between $1 million and $10 million in wealth is meaningful (go big), but the difference between 0 and $1 million is profound (sell). Every entrepreneur should bank enough money to provide economic security for their family … at any opportunity. For every CNBC story on Spiegel and Zuck turning down offers and going on to capture billions, there are dozens of founders who should have sold. 

Pro tip: your VCs will encourage you to “be in it to win it,” and to keep going, as they are already rich. Assume you are not Mark Zuckerberg. 

Speaking of Zuck, I think he’d be happier if he’d sold to Microsoft (I don’t know him, so this is pure speculation). A powerful algorithm for happiness is to be wealthy but anonymous. Perhaps as a coping mechanism for realizing the significant damage he levies on the world, Zuck has developed the attributes of a sociopath. At some point, he’ll likely be criminally charged. Instead, he could have worked in Seattle for 27 months, retired to Hawaii, invested in rockets, owned a football team, and produced Cats for the big screen.

With any software start-up, there is a non-zero probability that you wake up the next day and find that a better-resourced firm (Microsoft, Oracle, Salesforce, Adobe) has deployed 200 engineers to copy your product, bundle it with their stack for free, or near free, and … welcome to zero. I believe this is happening to Slack, but more slowly than Netscape, as Microsoft’s General Counsel has likely coached Satya to charge a nominal fee for Teams and let Slack bleed out, instead of putting a bullet in its head and stirring the DOJ from a 3-Ambien slumber.

FedEx is in the midst of being featurized by Amazon, who can make investments across their vertical stack that FedEx can’t match, as Amazon has antimatter (Prime, AWS, AMG). The Memphis firm’s most recent earnings were a sh*t-show with top- and bottom-line misses, drivel about a slowdown in air freight, and (my favorite) an unfavorable calendar — a Kabuki dance attempting to distract investors from the fact they’re being featurized by Amazon. 

FedEx shareholders have woken up in an M. Night Shyamalan nightmare. Instead of seeing dead people, investors are haunted by Mercedes-Benz Sprinter vans with an arrow the shape of a smile on their side. Everywhere. They might as well be German Panzer tanks fighting a white-and-purple cavalry of FedEx trucks. There will be a lot of macho battle cries from FedEx, some heroism, and an increasing stench of death. (Can’t help it, I love WWII war metaphors.) 

The Monopoly Algorithm: Innovation, Obfuscation, Exploitation


To be fair, Amazon is a better-run company than FedEx, who has stuck their chin out with an offering that, from a consumer standpoint, feels 1995. In addition, Fred Smith spent a great deal of time lobbying the president to lower corporate taxes so he could free up capital to buy back shares, instead of fighting Amazon.

The clean-sheet, technology-driven innovation at Amazon, coupled with cheaper capital, has caught FedEx flatfooted. Amazon: 

  • Has the most on-time deliveries the week following Black Friday: FedEx 90%; UPS 93%; Amazon 94%.
  • Charges $80 for 600 pounds of boxes from a seller’s warehouse vs. $104 at FedEx and $160 at UPS.
  • In Q4, Amazon will invest $1.5 billion in its one-day shipping initiative.

As Amazon is vertical, the return process is nearly frictionless. I have an Amazon 4-star store on the street level of my office. I can take a product downstairs, hand it to them, and they handle the rest. A return via FedEx involves printers, labels, and additional costs to have them package. 

Despite what feels like an invading army of Amazon vans, the reality is the Seattle firm is doing more with less — better service with less CapEx.


Evading regulators, tax avoidance, a 1,000-person communications department, exploiting our culture’s idolatry of innovators — these weapons have rendered CNBC Amazon’s bitch. The result is a firm that throws its weight around like no other. Amazon banned merchants from using FedEx right before the holidays. That’s like staging a mock homecoming queen ceremony so you can pour pig’s blood on your competitor in front of the senior class. 


“Deliver with Amazon. Be your own boss. Great earnings. Flexible hours. Make more time for whatever drives you.” Amazon has taken a page from Uber and is leveraging the romanticization of entrepreneurship, the need for flexibility, and the decreasing options of non-degreed workers in rural areas. There are already stories depicting breakneck delivery schedules that obviate luxuries such as bathroom breaks. FedEx drivers get paternity leave and (gasp) health insurance.

What’s a Tennessee Girl to Do?

Sell or merge. FedEx stock is cheap and will get cheaper. EBITDA will decline as management will be forced to make incremental investments in a futile game of catch-up. But the real virus infecting the stock has already taken hold of the delivery firm’s corpus. Amazon did a Jedi mind trick last week. Banning merchants from using FedEx convinced the markets, with a single press release, that FedEx has regressed from “growth” to “mature” to a declining firm.

A Walmart acquisition would mean the retail giant goes (more) vertical for an 11% dilution ($38 billion vs. $340 billion market caps). Walmart would recognize economies of scale (accretive), buttress their grocery offering (the gangster unlock of the last five years in business), burnish their data set, and go Yoda on Amazon’s a$$ — old, but not to be trifled with. FedEx solves their succession problem (CEO is 75), gets 5,000 well-staffed distribution centers (stores), and sells at a high. Time is not on their side. The stock price today will seem overvalued tomorrow.

A more interesting and bolder tie-up would be with Shopify. The pride of Canada boasts a $45 billion market cap vs. FedEx’s $38 billion (think about that). The combined firm would be a viable option to Amazon (the anti-Amazon) — increasingly attractive positioning to a growing cohort of merchants. Retail is an enormous and fragmented business that wants out of the Amazon gulag. 

Shopify-Ex would offer retailers something they don’t get from Amazon: partnership. Newco would provide merchants a lot of the great taste of Amazon (robust e-commerce tools and fulfillment) without the calories (merchants keep their data, control the customer, branding, no private label launches on backs of merchant data).The much larger firm would have a combined market cap of $83 billion, high single-digit revenue growth, and likely register multiple expansion as the complexion of the business would move to recurring revenue. It would captivate the markets (see above: CNBC’s bitch). This could be the biggest thing since Tim Hortons.

Everything Everywhere Ends

In 24 months, FedEx will not exist in its current form. A lack of innovation, and a competitor who can overwhelm enemies with cheap capital and Jedi mind tricks, has featurized one of the great success stories of modern business. The resulting firm, post acquisition of FedEx, will offer an increase in shareholder value, superior customer experience, fewer jobs, less tax revenue, and no paternity leave.  

We are barrelling toward a country with 350 million serfs serving 3 million lords. We attempt to pacify the serfs with more powerful phones, bigger TVs, great original scripted television, and Mandalorian action figures delivered to your doorstep within the hour. The delivery guy might be forced to relieve himself in your bushes if not for the cameras his boss installed on every porch.

Life is so rich, 

P.S. Two weeks ago I wrote a letter to Omid Kordestani, chairman of Twitter, expressing my concerns about a part-time CEO relocating to Africa. I haven’t heard back. Maybe they are busy looking at Nigerian crypto charts and writing longer explanations about why #burntheJews is ok. 

P.P.S. Spoke to NYU colleague Adam Alter about our obsession with screens.



  1. Jeffrey Briggs says:

    yeah…wrong big time. in fact amazon backed out of delivery competition. Mr Bezos is not God…though he behaves like he is.

  2. Kenneth says:

    Curious what you think of this prediction now? Standing by it?

  3. jim says:

    Funny to read this in September 2020…

  4. Alan says:


  5. Xu Ning says:

    Professor, it seems your argument against FedEx can be equally levied against UPS. What’s the difference that makes you call out FedEx?

  6. Gary says:

    Haha, how much did Amazon pay this author to spread propaganda garbage? Funny!

  7. Tavis McGinn says:

    I know this is an article about FedEx… but you mention in passing that Mark Zuckerberg has the attributes of a “sociopath.” In my experience (as a researcher), people often hear that word (sociopath) and imagine a “mass-murderer wearing a ski mask” or a “James Bond super-villain.” Just to clarify… a sociopath is “a person with a personality disorder manifesting itself in extreme antisocial attitudes and behavior and a lack of conscience.” In other words, a sociopath is willing to hurt society to help themselves because they lack empathy. They don’t have a moral compass which affects their perceptions of “right” and “wrong.” This is a mental illness, not necessarily a character flaw. I personally don’t have the right, or the data, or the expertise to diagnose Mark as a sociopath. But I can understand why someone would have this concern.

    • Don says:

      You do realize the first iteration of Facebook, was a website FaceMash – a website for visually attacking girls who would not date losers like Zuck.

  8. Christie says:

    A great article. The idea of Shopify and FedEx merging is intriguing, and may be a good gangster move on paper, but I suspect there would be a monumental clash of organizational cultures, which could lead to failure (as many of these megamergers do). Walmart would probably be a better fit.

    • IAmADog says:

      Shopify and FedEx merging? What ever happened to “creative destruction”? If FedEx has had its day as Scott asserts, why try to prop it up at the expense of Shopify shareholders? If Shopify want to be vertically integrated with a delivery-provider, wouldn’t it be better to just to buy the FedEx assets it needs/ wants out of bankruptcy? FedEx was a great innovator and disruptor in its day – but would acquiring AT&T have made the iPhone a better product? I doubt it. If it’s time – let FedEx die. BTW – how the heck is UPS hanging on?

  9. Gonza says:

    A really gangster logo would ve been the “C” and de “K” forming a left pointing arrow the same way the “E” and the “X” do the right arrow in Fedex 😉

  10. Anton Sherwood says:

    When did technology get so advanced that a blog can’t show STATIC TEXT without Javascript?

  11. Bennett Little says:

    Beautifully written (“3-Ambien slumber” indeed) and extremely well-researched. That said, Fed-Ex does seem to be trying to regain market focus, with improved service and competitive pricing. UPS is just very trying.

  12. Dale says:

    Since Fdx is classified as a US airline, Shopify would have to figure out how to deal with the US laws on airline ownership

  13. Marty says:

    Have been a reader for only a couple of weeks now and thought I’d let you know I really enjoy your weekly newsletter. Fnancial and economic news and/or analysis is often boring and reading it feels like hard work. But I think your stories are actually fun and thought-provoking. Thanks a lot and keep it up!

  14. Mart says:

    A non-Chinese competitor of Amazon would be a good partner. Unfortunately, it doesn’t exist. Would Walmart really be able to challenge the upcoming eCommerce duopoly?

  15. John says:

    Love the write up. Something with real substance to bite on and chew. I keep looking to your “Pivot” podcast for this kind of thing, but mostly just a complaining(sorry) tone I keep hearing. Anyway, really appreciate your analytical insight when you get down to it!

  16. Danny says:

    FedEx Ground drivers are in fact 1099s or employees of FedEx contractors, not FedEx employees.

    • Batman says:

      They’re not 1099. They’re not even contractors anymore…they’re considered Independent service providers. Basically a company that performs independent services for FedEx. They have strick guidelines. (We all still consider it a contractor though hah)

    • Josh Ho says:

      @Batman So what you are saying is Fedex Contractors can walk out tomorrow for a better business model and hook up with Amazon. That would be sensational…

  17. says:

    I had to chuckle at you wit. Thanks for the viewpoints. I wonder if Shopify is the type of business that can compete in the future, as a Canadian, I don’t believe it, but could be wrong. I need to study their business in depth. Keep up these articles, they are excellent!

  18. Teresa Jones says:

    We are in a race to the bottom in society. It is very scary!

  19. Njonjo Ndehi says:

    No shortage of African companies worth more than $10bn. Not much by US standards but they’ve produced plenty of African USD billionaires. Jack won’t add much value to Twitter working long hours from Twitter HQ. Stop being a clock card tyrant. You’re right about Fedex getting Amazoned though.

    • IAmADog. says:

      “ No shortage of African companies worth more than $10bn.“ I’m skeptical. Prove me wrong…

  20. Joe says:

    As someone who has worked at UPS in the past, IIRC quite a few FedEx drivers are consultants (pulling a page out of the Uber textbook) whereas all of the UPS drivers are fulltime employees with full benefits. Sounds like great publicity for UPS but can’t be good business. And I’ve been onboard a few trucks where drivers were bragging about their compensation. Making it clear about how much they make in comparison to the people in corporate. Given how the company has brushed off the threat of Amazon for the last two decades I’m surprised big brown wasn’t the first target.

  21. Yamom says:

    Unless Amazon actually acquires FedEx, it’s going to crash and burn in comparison to big purple. It literally cannot compete with Fred’s global presence. It doesn’t have an airline (NO Atlas doesn’t count) and that takes decades. It’s got to do better than a couple nice vans.

    • Purple Promise says:

      This is the same thinking that landed the company where it is today. With a marketing guy running the company, FedEx is prime to be bought. The challenge will be dumping all those folks that celebrate tenure over innovation and hierarchy over value. Entropy has arrived in Memphis.

    • SpiraMirabilis says:

      If it wants an airline, it can buy one. It’s already bought a minor position in Sun Country for example. That could easily become a wholly owned subsidiary by the expedient of just buying out their current owners which considering they are a private equity firm would be well motivated to sell, since that’s what private equity does.

    • Ian Fearted says:

      Ya…Ever heard of Prime Air and their 50+ fleet of jets with a daily non stop to Hawaii? Took a year, not decades.

    • Purpex says:

      @Ian Fearted Yes!

    • says:

      @Ian Fearted Prime air is operated by Atlas and the Atlas workers are about to revolt. One thing about owning an airline is dealing with airline workers, a whole other problem.

  22. Aaron says:

    Great essay Scott! One other question to ask is if FedEx gets bought out, what does that mean for its competitor, UPS? Might Buster Brown lose its investment luster in a fragmented transportation sector? Look out below.

  23. SWong says:

    Having seen the insides of two of the three delivery juggernauts before Amazon joined the fray, I think the companies who felt they were disrupters got too comfortable thinking that the price to enter the business was too high to ever breed a viable new competitor. This is a good cautionary tale about what happens when you stop innovating and your management teams get lazy. Great post!

  24. Jim Barber says:

    In Fedex’s defense, they have spent so many years being the disrupters it’s hard to see the barbarians at the gates. I used to be an annual report photographer, and made the forward looking step of investing in a digital camera. $36K for something with way less quality than your iphone today. What i didn’t realize was that there were not going to be any more glossy AR”s, just 10K’s with a wrapper. Change is everything. Just ask the design firm that I used to shoot for. They had a whole floor in , yes, 72 Spring Street.

    • Greg Althoff says:

      Gosh, we were just talking about the salad days of annual reports yesterday. What a time to be a designer/photographer!

  25. dksall says:

    If the 350 million serfs live better than the lords of most countries, does it make a difference?

  26. Rob M says:

    This is so true. Just this week, (1) our condo complex was approached by Amazon reps to coordinate a gate access system with security safeguards for deliveries from Amazon; and (2) FedEx attempted to deliver a package to me, failed, conducted bad communication, then left a mailbox tag that had not been properly filled out, didn’t include my name, etc. So, evidence of one company innovating and owning it and the other exhibiting ineptitude and low morale.

    • Fred S. says:

      Spot on. The company struggles to innovate because the mindset is not there. Couple that with all the technical debt, old school thinking and obtuse processes and you have a righteous mess. Jurassic Park. They can’t get out of their own way. External hires should run from this place. The company is not agile enough and is fatally allergic to change.

  27. Rick says:

    Is the quip: “worked in Seattle for 27 months, retired to Hawaii, invested in rockets, owned a football team, and produced Cats for the big screen.” referencing someone I am not aware of?

  28. Philip Lay says:

    Accurate prediction from Prof Galloway, in my view. The inertia at Fedex is likely to prevent any ability to respond effectively to Amazon ‘ s challenge. Time for Fred Smith and board to sell and Walmart is probably the most viable suitor.

  29. Joe Buhler says:

    Great thinking, the merger with Shopify. Probably makes too much sense to happen but would be a great move.

  30. Steve Green says:

    FedEx ground drivers do not get the same benefits as xpress drivers!

  31. Alex Birch says:

    I would have gone FedWrecks

  32. Dean says:

    I would pay good money to hear you and Alter have a conversation. All the way from the tip of Africa, I would make the trip. (On another note, Jack might find that business in Africa is not quite what it seems. Good idea on paper. The reality here though is an ice bath.)

  33. Mr. Shmatco says:

    Scott, keep those emails up. Some of it crap, most of it is the wisdom to launch a revolution. Washington should be listening to you with bated breath. KEEP IT UP BIG DOG!

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