FedEx cuts ties with Amazon in sign of new rivalry

FedEx severs ties with Amazon as online giant builds its own delivery fleet

FedEx's retreat from Amazon could put some pressure on the tech giant at a time when it is relying on third-party partners to help expand delivery operations.

FedEx will effectively end its ground-delivery contract with Amazon at the end of August, according to sources.

The move by the USA package delivery company comes two months after it decided not to renew its contract with Amazon for US cargo delivery through its plane-based express service.

Meanwhile, FedEx Ground is working to wring out more residential profit by shifting the delivery of almost 2 million SmartPost packages from U.S. Postal Service mail carriers to its own drivers.

FedEx Corp. seems to have finally realized that it's futile to label Amazon.com Inc.'s delivery aspirations as a "fantastical" threat.

In recent months, FedEx has made it clear that it views Amazon as a competitor rather than a partner. Last year, Amazon accounted for 1.3 per cent of FedEx's total revenue. By using its reams of customer and geographic data, Amazon can choose to handle the shipping of packages going to densely populated areas, which is more efficient than making deliveries to rural locations.

Amazon made up about 1.3% of FedEx's sales past year.


Amazon in a statement said it is "constantly innovating to improve the carrier experience and sometimes that means reevaluating our carrier relationships". The Seattle-based company began laying the groundwork for that business after the 2013 holiday season, when an uptick in sales swamped the UPS and FedEx networks and caused delivery delays. This follows a June announcement that FedEx would cease US air-delivery services for Amazon.

Amazon has been slapping its smile logo on trucks and planes to deliver goods directly to customers.

FedEx can't give up on the e-commerce game entirely, though.

Some of the ground packages that FedEx handled for Amazon will migrate to UPS, said David Ross, an analyst with Stifel Financial. 'We don't see them as a peer competitor at this point in time.

"I am baffled", said Satish Jindel, the founder of ShipMatrix, which provides technology to the shipping industry, and a former employee of a startup delivery company that later became FedEx's ground unit.

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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