FedEx will not renew its ground deliveries contract with Amazon at the end of August, Bloomberg reported Wednesday. Other news outlets, however, said that FedEx issued a statement saying it was severing ties with Amazon.
"This change is consistent with our strategy to focus on the broader e-commerce market, which the recent announcements related to our FedEx Ground network have us positioned extraordinarily well to do", FedEx officials said in a statement. The shipping companies later made adjustments to improve operations, including implementing new restrictions for large retailers such as Amazon. Just as traditional media companies were all too happy to pad sliding DVD sales with licensing fees from Netflix Inc. for years, FedEx and rival United Parcel Service Inc. have enjoyed the revenue fruits of the booming demand for e-commerce shipments ushered in by Amazon. "FedEx has been a great partner over the years and we appreciate all their work delivering packages to our customers". But Amazon is also rapidly bolstering its own delivery network, agitating established logistics businesses.
Amazon leased a fleet of planes, acquired semitrailers and built out delivery networks in major cities. 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. According to one source, FedEx will technically remain an Amazon vendor, but will not handle any national-account traffic, which is mostly everything it moves for Amazon.
"[We] look at Amazon as a wonderful company and service and they're a good customer of ours", Smith said in a December earnings call. "We don't see them as a peer competitor at this point in time".
FedEx already warned in June that U.S.
Besides building its own delivery business, the online retailer wants to drop off packages to its shopper's doorsteps even faster, which is proving to be a bigger expense than expected. In April, the company announced it would begin offering free next-day shipping to its 100 million Prime members. FedEx's worldwide deliveries for Amazon are likely very small, he said.
"This will make it not worth mentioning", said Stifel analyst David Ross, in a note to clients.