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Amazon loses contract with FedEx Express as delivery service speeds up



According to CNBC FedEx has decided not to renew one of its Amazon shipping contracts in an intensified competition between the two companies. The contract in question is the FedEx Express contract from Amazon, which, according to Amazon, is used for the air transport of parcels and not for deliveries by land over the last mile. As previously reported, Amazon Prime's two-day deliveries are primarily transacted by UPS, and Amazon indicates that the contracts with FedEx for the handling of other logistics services, including closing the gaps not closed by UPS, still exist.

FedEx's decision not to extend its contract with Amazon is testament to the growing tensions between the US inland waterway industry and the country's largest and most dominant e-commerce company. The success of Amazon is partly due to the fact that mail order companies such as FedEx, UPS and the United States Postal Service offer free shipping.

It's no secret that Amazon wants to own every link in its logistics chain, from the warehouses where its products are stored to aircraft, cargo ships, and vans that transport its products around the world. Just last month, Amazon boss Jeff Bezos broke ground on the company's $ 1

.5 billion, 3 million square foot air hub, which is connected to Cincinnati / Northern Kentucky International Airport. Earlier this week, Amazon introduced its brand new Hybrid Prime Air delivery drone, a device that Amazon hopes will one day compete with FedEx and UPS delivery vans.

"FedEx has made the strategic decision not to extend the FedEx Express US Domestic Agreement with Amazon.com, Inc. as we focus on serving the broader e-commerce market," it says Statement by FedEx, published by CNBC journalist Carl Quintanilla on Twitter, "This decision will not affect existing contracts between Amazon.com and other FedEx businesses or international services." So it looks like Amazon FedEx will continue to use for shipping in certain circumstances, although we do not know how big these are. Part of the businesses of both companies involved FedEx Express.

FedEx further states that last year Amazon did less than 1.3 percent of its total It was also made clear that Amazon is not the biggest customer of the company, the decision not to abandon the Express contract may not have much impact on FedEx. "There is significant demand and growth opportunity for e-commerce, which is expected to increase from 50 million to 100 million parcels per day in the US by 2026," FedEx said. "FedEx has already expanded its network and capacity to serve thousands of e-commerce retailers. We are looking forward to the future of e-commerce and its leading role.

The decision should not surprise Amazon, which has been building its own delivery infrastructure for years to lower and maintain logistics costs More control over how products are shipped from manufacturers to Amazon warehouses and customer homes. The company manages a vast logistics network for warehouses, air hubs and freighters, as well as a growing network of personal delivery Flex drivers, operating on a Uber-like contract model.

"We respect FedEx's decision and thank them for their role they have taken over the years for Amazon customers," an Amazon spokesman told The Verge .

But only a glimpse of the company's financial data illustrates the cost of Amazon's growth. Over the last 10 years, the company's logistics and shipping costs have increased from approximately $ 1 billion each to approximately $ 34 billion and $ 28 billion in 2018, respectively. By owning the infrastructure of its shipping network, Amazon has been able to dramatically reduce costs while enabling faster and faster delivery of products, such as the existing Same Day Today's Prime Now initiative and food and grocery delivery programs.

On the other hand, FedEx does not seem to be interested in giving one of its main competitors an advantage that puts it out of business. Although FedEx Amazon will continue to provide some of its services, the company is currently developing its own alternatives to Amazon-based delivery programs. FedEx now offers retailers FedEx Extra Hours, an option for late night delivery, with products that are ordered just like Amazon Prime the next day or two days until 2am.

Update June 7, 3:03 pm ET: Amazon statement added.


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