FedEx Express cuts ties with Amazon for domestic contract
Jun 10 2019
FedEx Corp on Friday chose to not renew its contract with Amazon.com Inc for USA cargo delivery through FedEx Express, the unit that delivers packages on planes, a move that reflects the broader trend of the e-commerce company moving services in-house.
"The decision does not impact any existing contracts between Amazon and other FedEx business units or relating to worldwide services", the statement added. "The percentage of total FedEx revenue attributable to Amazon.com represented less than 1.3 percent of total FedEx revenue for the 12-month period ended December 31, 2018".
"Amazon had a better rate with UPS so it made no sense for them to use FedEx", said Dean Maciuba, director of consulting services at Logistics Trends and Insights.
FedEx Express is the company's quick shipping option.
"FedEx has already built out the network and capacity to serve thousands of retailers in the e-commerce space, including brands such as Target, Walgreens and Walmart", a statement from the Memphis-based logistics company reads. "We are excited about the future of e-commerce and our role as a leader in it", it said.
Analysts said the move has the potential to accelerate Amazon's own delivery capabilities.
Though the company's existing contracts with Amazon will remain in place, FedEx will no longer provide express service for Amazon, which the company says represented a little over a single percent of its annual revenue a year ago.
"This is just a fact of Amazon using less of FedEx over the previous year or so given that they're building out their own air fleet, combined with the fact their volume probably didn't warrant the kind of discounts they were getting", Klaskow said.
FedEx is reportedly making two significant changes to its Express U.S. ground delivery service.
Amazon's FedEx Express contract is in question, which according to Amazon is used for air transportation of packages and is not used for last-mile and ground deliveries, The Verge reported on Friday.
In a move not entirely expected but hardly surprising, FedEx Corp. Dropping Amazon will allow FedEx to carry "more desirable freight" than Amazon's business from a profitability standpoint.
Amazon did not immediately respond to Business Insider's request for comment.