In brief: Amazon is scrambling to reduce its reliance on third parties for last-mile deliveries, so FedEx has chosen not to renew their partnership. The surge in e-commerce business has been both a blessing and a curse for the courier, who is now more interested in cutting costs while facing increased pressure to adapt to an emerging rival.
Lately, FedEx has been busy cutting its ties with Amazon. According to Bloomberg, the company will opt out of renewing the ground-shipping partnership it has with the web retail giant once it expires at the end of this month. This comes after previously dropping out of a similar agreement where FedEx’s Express unit had been flying Amazon packages in the U.S.
The decision isn’t unexpected when you consider Amazon has been expanding its logistics empire by working on a shipping network that can deliver almost half of all packages that leave its warehouses. It’s also worth noting that USPS and UPS saw much more of a hit as a result, with FedEx contributing to a relatively small share of the total deliveries.
FedEx says the change is “consistent with our strategy to focus on the broader e-commerce market,” which is one way of saying the company wants to distance itself from emerging rival Amazon. For now, the courier will still handle Amazon’s international deliveries, but will otherwise focus on strengthening the FedEx ground network so that it can remain competitive in the future.
Amazon deliveries only made up 1.3 percent of total revenue for FedEx in 2018. Others like UPS, however, are much more dependent on the giant and will likely jump in at the opportunity to replace the courier for “last-mile” deliveries. Then again, that won’t last forever as Amazon is quickly growing its air fleet and even investing in startups that can help with ground deliveries.
In the meantime, FedEx has started making overnight deliveries with a program called Extra Hours and is also testing an in-house built delivery robot that can climb stairs.