Published: Thu, August 08, 2019
Markets | By Otis Pena

FedEx Will No Longer Deliver Amazon Packages to Customers

FedEx Will No Longer Deliver Amazon Packages to Customers

FedEx and Amazon are parting ways.

Both FedEx and rival UPS have been carrying out deliveries for the Seattle-based firm, but it has recently begun expanding its own service, Amazon Shipping, beyond trial services in London and Los Angeles. Most, if not all, of that business is believed to have been concentrated during the peak delivery season.

FedEx Corp. seems to have finally realized that it's futile to label Amazon.com Inc.'s delivery aspirations as a "fantastical" threat. The company said at the time it would continue serving online shoppers through its partnerships with other companies not named Amazon.

"We think (FedEx) is treating Amazon like any other competitor".

FedEx is reducing its dependence on Amazon as the online retailer builds out a logistics network with hundreds of fulfillment centers and adds next-day air capacity with leased jets. Still, it is not large enough, and certainly not compensatory enough, for FedEx to stick around.

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"Nothing but respect for FedEx but they were very small piece of our network and vice versa, we wish them nothing but the best (conscious uncoupling at its finest)", tweeted Amazon executive Dave Clark, who oversees the company's warehouses and delivery business. In theory, Amazon could still ship packages via FedEx, but it would not receive the significant discounts that were built into its ground-shipping and express contracts. Amazon is also starting a home-delivery service modeled after the contractor-based ground unit at FedEx, which flagged the competitive risk in its latest annual report to US regulators.

'We have great strategic partners who are part of our long term plan and we appreciate what they do for customers'.

Amazon accounted for less than 1.3 per cent of FedEx's revenue a year ago. 'We don't see them as a peer competitor at this point in time. Last month, Amazon admitted it would cost more than the $800 million it had said it would spend to switch its Prime two-day delivery promise to one-day delivery. FedEx also signed up more dropoff and pickup points, and is even testing a ground delivery robot.

The surge in e-commerce business has been a double-edged sword for FedEx and UPS by spurring sales growth while squeezing profit margins, since home-deliveries are more costly to handle than drop-offs at commercial customers.

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