FedEx breaks with Amazon, will no longer deliver packages

Andrew Cummings
August 11, 2019

US-based multinational parcel delivery service provider, Tennessee-based FedEx Groups confirmed on Wednesday, the 7th of August 2019, that the American courier delivery services company would be terminating its contract with Inc.

For FedEx as for the many other companies and industries Amazon has decimated over the past 20 years, the problem in confronting Amazon may turn out to be one of margins.

FedEx said it is no longer working with Amazon so that it can make more deliveries for e-commerce companies.

FedEx is cutting ties with Amazon as the online retailer builds out its own delivery fleet, directly competing with the shippers who used to deliver its packages.

Amazon has been expanding its own delivery network of planes, trucks and vans and is regarded as a potential long-term threat to FedEx and rival United Parcel Service Inc, both of which have long counted the e-commerce company as a customer.

Meanwhile, Amazon develops it's land and air transport fleet, gaining more control over how its packages are delivered while reducing its dependence on FedEx, UPS, and the United States Postal Service.

FedEx (NYSE:FDX) stock fell 3.7% on Wednesday after it announced that it will no longer make ground deliveries for Amazon (NASDAQ:AMZN).

In a regulatory filing in February, Amazon tweaked the description of its business to say that competitors include transportation companies so FedEx "is taking them at their word and dropping them as a client", Becker said. At the same time, it has greatly reduced its reliance on FedEx, UPS (NYSE:UPS), and the US Postal Service.

"We think (FedEx) is treating Amazon like any other competitor". While it is true that Amazon is synonymous with an online order, it is important to note that other retailers like Target and Walmart have also gone into online deliveries in a big way. On The Ground After FedEx allowed the first deal to expire, Amazon then only accounted for 1% of FedEx's total business. 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.

Analysts said FedEx would still have a role in moving some Amazon packages, but it would be an even smaller part of its business.

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