FedEx will stop delivering packages for Amazon on the ground in the U.S. when the shipping company's contract expires at the end of the month, it announced yesterday. “This change is consistent with our strategy to focus on the broader e-commerce market,” it said.
“The news follows FedEx’s decision in June to terminate its air shipping contract with Amazon in the U.S. at a time when Amazon made up 1.3% of FedEx’s sales. It still provides Amazon with air shipments internationally,” Richard Morgan reports for the New York Post.
“Furthermore, the decision reflects the reality that Amazon’s economic reach has grown so great that the company has started to alienate not just rival retailers, but longtime business partners,” write David Yaffe-Bellany and Michael Corkery for The New York Times.
“That growth has left companies like FedEx with something of a quandary: keep working with Amazon, even if it could hurt long-term business prospects, or cut ties with the company and try to build a shipping business around other players,” Yaffe-Bellany and Corkery observe.
“FedEx has made the decision that it no longer wants to sharpen its executioner’s sword,” Scott Galloway, a professor at New York University’s Stern School of Business, tell them. “It’s another reflection of this winner-take-all ‘Hunger Games’ economy that is dominated by an increasingly few number of companies.”
Specifically, “while it is walking away from the largest e-commerce player in the U.S., FedEx is positioning itself as a go-to carrier for Target Corp., Walmart Inc.and the world of retailers that aim to compete with Amazon,” point out Paul Ziobro and Dana Mattioli for the Wall Street Journal.
“FedEx’s decision will require Amazon to find a new way to handle millions of packages ahead of the critical holiday shopping season at the same time Amazon is looking to speed many home deliveries to one-day shipping.”
But “the pullback is more negative for FedEx than for Amazon, said Satish Jindel, founder of SJ Consulting Group, which provides data and advice to logistics companies. Amazon can still rely on United Parcel Service Inc., the U.S. Postal Service, regional carriers and its own growing network to deliver packages, he said. FedEx will seek to make up for the lost volume with traditional retailers such as Walmart Inc., he said,” writes Thomas Black, who broke the story.
“The move is a way for FedEx to ‘get Walmart to realize that they’re not working with Walmart’s biggest competitor and to have Walmart make FedEx their primary carrier,’ Jindel said on Bloomberg Radio,” Black adds.
Dave Clark, Amazon’s senior vice president, operations, seemingly wasn’t feeling the negativity one iota. “Nothing but respect for FedEx but they were very small piece of our network and vice versa, we wish them nothing but the best (conscious uncoupling at its finest).We have great strategic partners who are part of our long term plan and we appreciate what they do for customers,” he tweeted.
“Amazon has been expanding its own delivery network of planes, trucks and vans and is regarded as a potential long-term threat to FedEx and rival United Parcel Service Inc, both of which have long counted the e-commerce company as a customer,” write Reuters’ Ankit Ajmera, Sanjana Shivdas and Lisa Baertlein.
“'What was a frenemy, they’ve now figured out is their competitor,' Trip Miller, managing partner at Memphis-based Gullane Capital, tells them, referring to the FedEx relationship with Amazon,” they add.
“The Seattle-based company began laying the groundwork for [its own delivery] business after the 2013 holiday season, when an uptick in sales swamped the UPS and FedEx networks and caused delivery delay. The shipping companies later made adjustments to improve operations, including implementing new restrictions for large retailers such as Amazon,” Jonnelle Marte writes for The Washington Post.
“Amazon leased a fleet of planes, acquired semitrailers and built out delivery networks in major cities. It also built warehouses throughout the country. However, the company is still far from being on equal footing with UPS and FedEx in this realm, The Washington Post reported in June,” she adds.
Meanwhile, “the Amazon announcement continues an eventful year for FedEx Ground. In May, the company revealed its plans to deliver on Sundays year-round and rely less on the U.S. Postal Service. FedEx executives in June earnings said Ground will become the premier low-cost provider of residential deliveries,” Max Garland writes for the Memphis Commercial Appeal.