FedEx scraps package delivery deal with Amazon
FedEx will no longer deliver Amazon packages in the US in the latest sign the ecommerce company is becoming a competitor in shipping and logistics.
The delivery company said in a statement it would not renew its contract with Amazon for ground delivery — bringing packages to customers’ homes — when it expires at the end of August. That followed FedEx’s decision in June to not renew its Express air service contract to carry Amazon packages between warehouses and delivery hubs. FedEx will still deliver packages internationally.
The move sent FedEx shares down as much as 3 per cent in morning trading in New York. Amazon shares were down less than 1 per cent amid a broader market pullback.
“This change is consistent with our strategy to focus on the broader e-commerce market,” FedEx said in a statement.
Amazon said: “We are constantly innovating to improve the carrier experience and sometimes that means re-evaluating our carrier relationships.”
Relations between Amazon, which sends billions of parcels to customers every year, and its delivery partners have grown more fraught in recent years as the ecommerce company has expanded its in-house delivery network, from leasing cargo planes and building a $1.5bn air freight hub to buying trailers and vans and creating a new network of delivery contractors.
Amazon spent $27.7bn on worldwide shipping last year. Its costs are rising this year as it cuts shipment times to one day for members of its Prime subscription programme. It sends packages through a number of delivery partners, including UPS and the US Postal Service as well as its own network.
Analysts at Cowen estimated that in 2018, 4.4 per cent of Amazon’s 2.3bn US packages were delivered by FedEx, compared with 55 per cent by the post office and 23 per cent by UPS.
FedEx said Amazon accounted for 1.3 per cent of revenue last year. It has been trying to expand its business with other ecommerce retailers, investing in fulfilment centres and offering delivery seven days a week.