Word leaked today that FedEx has decided not to renew its contract with Amazon for Express air delivery. The Washington Post said it could impact Amazon during the holiday shopping season when Amazon “has sometimes struggled to get packages to customers on time.”
While noting that Amazon relies more heavily on UPS and USPS than on FedEx, the Post said, the lack of an air contract with FedEx could hurt Amazon during the holidays “if it sees a flood in last-minute orders and needs extra capacity.”
But those kinds of seasonal spikes can put stresses on shipping carriers’ operations – and committing to meet Amazon’s holiday expectations can prove costly.
Keep in mind that this only impacts Amazon’s use of FedEx Express – it doesn’t impact last mile deliveries, and FedEx will serve as a carrier for Amazon.
Friday’s news comes a week after FedEx’s announcement that it is upping its game in ecommerce by moving to 7-day residential delivery year-round “to further serve the fast-growing e-commerce market.” It also said it was moving to lessen its dependence on USPS by integrating FedEx SmartPost volume into standard operations and adding large-package capabilities.
CNBC reporter Carl Quintanilla tweeted a statement from FedEx in which it called it a “strategic decision” and said “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.” It said there was significant demand and opportunity for growth in ecommerce and said it had the capacity to serve thousands of retailers in the ecommerce space.
Amazon provided us with the following statement: “We respect FedEx’s decision and thank them for their role serving Amazon customers over the years.”
Friday’s news also comes days after Amazon showed off delivery drones at the re:MARS conference that can fly up to 15 miles and deliver packages under five pounds to customers in less than 30 minutes. “And, with the help of our world-class fulfillment and delivery network, we expect to scale Prime Air both quickly and efficiently, delivering packages via drone to customers within months,” Amazon announced.
Upon learning of the FedEx decision not to renew Amazon’s Express contract, Webgility CEO Parag Mamnani tweeted, “Great for SMBs!”
How will this impact Amazon third-party sellers, including those using Fulfillment by Amazon and Seller Fulfilled Prime?
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Update 6/7/19: FedEx provided us with the following statement:
“There is significant demand and opportunity for growth in e-commerce which is expected to grow from 50 million to 100 million packages a day in the U.S. by 2026. 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. FedEx has made the strategic decision to not renew our FedEx Express contract with Amazon as we focus on serving the broader market. We are excited about the future of e-commerce and our role as a leader in it. The current contract is with FedEx Express and ends on June 30, 2019.”