FedEx ends ground delivery partnership with Amazon in sign of new rivalry

FedEx won't renew ground delivery contract with Amazon

Shipping company officials said the company would not renew its ground delivery contract with Amazon when it expires at the end of August and would focus on business from other retailers.

It will no longer carry out ground deliveries for Amazon, having cancelled its United States air transport contract in June, but will continue making worldwide deliveries.

FedEx Ground CFO Bob Henning on the company's plans for the busy holiday season and the potential competition in shipping from Amazon.

FedEx has been expanding its services to capitalize on consumers who prefer to shop from the comfort of their homes, increasingly for large purchases such as televisions, mattresses and sofas.

At the same time, e-commerce has become a priority for retailers like Walmart and Target, meaning that FedEx can distance itself from Amazon.com without suffering the same competitive damage it might once have. Amazon only made up about 1.3% of FedEx's sales in 2018, according to Bloomberg.

The move poses a threat to delivery firms like UPS and previously FedEx, which have worked alongside the US Postal Service to speedily get Amazon's goods out to its customers. The company said at the time it would continue serving online shoppers through its partnerships with other companies not named Amazon.

More news: Apple To Restrict Background Data Access For Messaging Apps On iOS

Amazon leased a fleet of planes, acquired semitrailers and built out delivery networks in major cities.

Amazon is "constantly innovating to improve the carrier experience and sometimes that means reevaluating our carrier relationships", the company said in a statement. Then, in June, it said it was stopping the express deliveries for Amazon, typically the fastest way customers can send packages, including overnight shipping.

Despite its outsize role in e-commerce, Amazon has never been a major source of business for FedEx.

Despite Amazon's investment in a new shipping network, Goldman Sachs analysts estimate it could cost an additional $122 billion to catch up to industry leaders FedEx and UPS. "They could not afford any longer to directly support a competitor", Mr Maciuba said. The company announced in May that its ground unit would begin seven-day service in January, deliver more packages that had been handed off to the postal service and invest to handle oversized packages.

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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