FEDEX JETTISONS AMAZON – CORPORATE

When FedEx’s contract for ground delivery of Amazon goods expires in August, FedEx has said that it would not renew.

This follows the company’s decision in June to end air-shipping for Amazon.  FedEx will, however, continue to handle Amazon international shipments, for the present.  There are two elements in play here – one, is that Amazon is working to build its own air and ground delivery services, expanding its fleet of airplanes as well as contractors to make ground deliveries.  The second element is that FedEx, itself, has other plans in mind and has decided to position itself as the “go-to” carrier for the “broader world of retailers that aim to compete with Amazon,” (ref WSJ).  FedEx has said in a statement that, “The change is consistent with our strategy to focus in the broader e-commerce market, which the recent announcements related to our FedEx Ground network have us positioned extraordinarily well to do.”  Interestingly, the FedEx decision will require Amazon to handle “millions of packages ahead of the critical holiday shopping season at the same time that Amazon is looking to speed up home deliveries to one-day shipping,” (ref. WSJ).  Amazon insiders have said that the company will distribute packages among other carriers and its own network and that it doesn’t anticipate any disruption of service for its new Prime one-day service.  It appears that the company has already begun to wind-down its business with FedEx, using its own drivers to deliver 45% of its July orders, the U.S. Postal Service 28% and UPS, 21%.  FedEx didn’t register any deliveries in July, according to SJ Consulting that keeps track of such data.  FedEx plans to add seven-day delivery service in the U.S. next year and “bring to customers” doorsteps many of the items it currently drops off at local post offices.  According to spokespersons, the shift will seek to lower costs by building density along FedEx Ground routes while at the same time shift about two million packages daily out of the Postal Service’s network.  These long-term changes that we’re seeing today actually began to be fomented with the holiday season of 2013, when, for the first time, Amazon orders overwhelmed U.S. carriers. At that point, Amazon began to build its own carrier network to handle the overflow of orders as well as provide “last mile” service for its goods.  Now that that has been largely achieved, the company has begun to offer its delivery services to others retailers and consumers.  It’s said that Amazon’s end goal is to join with companies across industries to ship their goods, much in the same way that FedEx does today.  It will be interesting to see how the “shipping contests” ultimately turn out.

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