Commentary

Amazon Reinstates FedEx Ground Deliveries For Third-Party Sellers

After a nearly a month of telling third-party vendors they absolutely, positively could not use FedEx for Ground and Home delivery of their Prime shipments, Amazon has reversed the edict. The company lifted the ban on those services at 5 p.m. ET yesterday, according to an email Amazon sent to merchants that was seen by CNBC’s Annie Palmer.

“An Amazon spokesperson confirmed to CNBC that the company is resuming Ground delivery service on Tuesday. The spokesperson said FedEx Ground and Home services have been consistently meeting Amazon’s on-time delivery requirements, so it reinstated the shipping option for Prime orders,” Palmer writes.

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“A FedEx spokesperson also confirmed that Amazon lifted the ban and said FedEx’s service levels had been strong during the peak holiday season, with an average transit time of 2.4 days for ground packages and 18% of ground packages were delivered early,” she adds.

“More than half of the items sold on Amazon come from third-party sellers, who post their goods for sale on Amazon’s online marketplace,” the AP’s Joseph Pisani reports  on Yahoo News.

“The loss of FedEx ground shipping put many third-party Amazon sellers in a bind over the busy holiday period. CNBC reported some merchants had to resort to other methods, sometimes at a higher cost, for Prime orders. They were still able to use FedEx Ground for non-Prime packages, as well as FedEx Express over the holidays,” Engadget’s Kris Holt writes.

“FedEx and Amazon’s relationship has been a rocky one. Earlier this year, FedEx ended  its contract with Amazon for Express shipping. It then stopped  ground deliveries for the online retail giant,” CNET’s Abrar Al-Heeti recalls.

“This comes as Amazon ramps up its own delivery network. In April, the company said it was spending $800 million that quarter to bolster its shipping infrastructure, and in June it expanded its air fleet. In May, the company held a ground-breaking ceremony for its new $1.5 billion air transportation hub in Kentucky,” Al-Heeti continues.

Indeed, “Amazon has spent billions of dollars over the last decade to build out its own delivery infrastructure as a way to eventually reduce costs it incurs by relying on third-party companies. In its last quarter, Amazon spent $9.6 billion on fulfillment, in part to support one-day Prime shipping. The company is now approaching the total package volume of both FedEx and UPS in the U.S. and is on pace to surpass both,” Nick Statt writes  for The Verge.

Amazon last month said it already delivered most of its own packages in the U.S. itself, the AP’s Pisani writes.

FedEx’s profits slipped in the months after ending its relationship with Amazon, a drop it attributed in part to the ‘loss of business from a large customer.’ FedEx is also in the midst of transitioning to a new business model, a change that’s driven up costs and put a strain on the company's profits,” Clare Duffy writes for CNN Business

FedEx’s stock went up as much as 3% after the news broke yesterday and ended the day up 1.8%, according to CNBC.

Some merchants evidently ended the day on an upbeat note, too.

“The abrupt decision to block FedEx Ground in mid-December forced Molson Hart to scramble during the busiest time of the year. The owner of Viahart LLC sells building toys and large stuffed animals on Amazon and other retailing sites. He said that after switching to FedEx as his primary shipping company in August, he had to reach out to UPS to see if he could arrange pickups at his warehouse outside Dallas,” Paul Ziobro writes  for The Wall Street Journal.

“He said shipping with UPS was a couple dollars more per package compared with the rates he negotiated when switching to FedEx -- which added up when he shipped as many as 600 packages a day during peak season,” Ziobro continues.

“We were literally having a party because we were saving so much money by switching from UPS to FedEx,” said Mr. Hart, who added that he lowered prices with the money saved so he could sell more products. “We wanted to get the flywheel going.”

Now that the FedEx trucks are back on track, presumably that flywheel is spinning again.

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