FedEx Cuts Ties With Amazon And Becomes A Threat

FedEx Cuts Ties With Amazon And Becomes A Threat
The logo of Amazon is seen at the company logistics centre in Boves, France, January 19, 2019. (Photo: REUTERS/Pascal Rossignol)

FedEx delivery of Amazon packages ends as the e-commerce company starts building up its own air and ground delivery network.

Just like any partners cutting ties, there's a threat to one's stability once the other leaves.

Last month, FedEx, in a government filing, said that Amazon's weakening delivery business could hurt FedEx's revenue and have a negative effect on the "results" of their delivery operations.

With retailers like Target and Walmart doing e-commerce, and consumers buying everything from toilet paper to trampolines from thousands of stores online, Amazon and FedEx severing of ties would hardly impact the delivery service.

In 2018, Amazon is just 1.3 percent, about $850 million, of FedEx's profits.

Amazon's senior vice president of operations, Dave Clark tweeted his "respect for FedEx, but they were [a] very small piece of our network and vice versa."

Saying that the "change is consistent" with the company's "strategy to focus on the broader e-commerce market" FedEx is a prime pick of companies competing with Amazon.

The Saturday ground deliveries of FedEx just started and next year is the roll out of their seven-day delivery in the US. This will include bringing to doorsteps of packages delivery companies usually leave at the post.

These moves spell lower costs because of the density on FedEx Ground routes along with the possible shipment of two million packages a day.

The no-more-ground-deliveries-after-August announcement came out on Wednesday but two months before, FedEx also announced the end of its air delivery for Amazon.

The threat now to Amazon is how it will manage the millions of deliveries this holiday season coupled with Amazon's quest of one-day shipping.

However, Amazon has other carriers it can redistribute its millions of packages a day to.

A person familiar with the situation said that Amazon's Prime one-day shipping won't get derailed.

Of course, Amazon can still use FedEx but without a contract, favorable rates are gone.

Amazon's third-party sellers, who do their own package deliveries, can still use FedEx.

FedEx has been aware of Amazon's logistics but they also know that it is too expensive to replicate their global network. Besides, e-commerce is just a small part of their business.

Still, reports have it that FedEx is looking into having more e-commerce deliveries.

FedEx isn't the only one delivering for Amazon. The company is also cutting ties with United Parcel Service (UPS) and US Postal Service.

Because Amazon is just starting out with its delivery network, FedEx is still going to take care of Amazon's international shipments.

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