FedEx drops delivery venture with Amazon
FedEx will no longer provide its ground delivery services to Amazon as the latter’s own fleet is turning into a threat for the company.
Joseph Pisani had the news for the AP:
FedEx says it will no longer make ground deliveries for Amazon as the online shopping giant builds its own fleet and becomes more of a threat to delivery companies.
The announcement Wednesday comes two months after FedEx terminated its air delivery contract with Amazon. FedEx said dumping Amazon is part of its plan to go after more e-commerce deliveries from other companies.
Traditional retailers like Walmart and Target want to sell more of their goods online, which in turn allows FedEx to distance itself from Amazon.com without suffering the same competitive damage it might once have.
“This does not come as a surprise to us,” Citi Research analyst Christian Wetherbee said in a note to clients. “The company is clearly trying to move away from its partnership with Amazon and we believe it is using this move as a selling point to win new non-Amazon business.”
Cowen analyst Helane Becker said FedEx’s profit margin on Amazon shipments is probably in the “very low single digits,” and she believes the company can replace those packages with more profitable business from other retailers.
CNN’s Jackie Wattles focused on Amazon’s rise as a threat:
Amazon’s obsession with speedier deliveries has overhauled the delivery landscape. Its aggressive plans to expand its internal shipping network threaten FedEx and UPS (UPS).
Over the past couple of years, Amazon’s moves are often met in lock step by FedEx: Amazon expanded its warehouse center, and FedEx debuted FedEx Fulfillment. Amazon announced single-day delivery, and FedEx said it would speed things up with seven-day shipping. Amazon began testing a delivery robot, and FedEx introduced the SameDay bot.
FedEx has pushed back on the notion that parting ways with Amazon will cause significant damage to its business.
“E-commerce is much bigger than any one company,” a spokesperson said in a June. “The average daily volume for small parcels in the U.S. is expected to double — from 50 million to 100 million — by 2026.”
The Verge’s Andrew Liptak noted that:
In recent years, Amazon has increasingly been doing much of the work to bridge that “last-mile” gap. It’s rented cargo planes, launched its own delivery network for Prime customers, and released new options for customers to have packages delivered directly into their homes, garages, or cars. It also recently unveiled a new drone to deliver packages directly to customers.
In a statement, Amazon said that it’s “constantly innovating to improve the carrier experience and sometimes that means reevaluating our carrier relationships. FedEx has been a great partner over the years and we appreciate all their work delivering packages to our customers.”
FedEx and UPS have also been expanding their delivery services: each announced that they would begin delivering packages seven days a week. FedEx has also begun shipping packages faster with a new program called Extra Hours. And earlier this year, it unveiled its own delivery robot, which it’s testing out in its Memphis headquarters.