FedEx Express have announced the decision to not renew their US domestic contract with Amazon.com in a bid “to successfully compete in the ecommerce market.”
The move will not impact existing contracts between Amazon US and other FedEx business units.
FedEx attributed their decision to Amazon US not being FedEx’ largest customer. The percentage of total FedEx revenue attributable to Amazon.com represented less than 1.3% of total FedEx revenue for the 12-month period ended December 31, 2018.
FedEx say that “there is significant demand and opportunity for growth in ecommerce.” The supplier says that the existing capacity of their logistic network enables them to be a “leader” in the ecommerce field.
Last September saw FedEx diminishing Amazon’s increasing presence in the fulfilment industry. FedEx’s executive vice president, Rajesh Subramaniam, said Amazon’s new delivery service “should not be confused as competition with FedEx.”
In January, FedEx echoed these words by highlighting their fulfilment superiority to Amazon’s capabilities. FedEx made their point by pointing to the marketplace’s lack of delivery service knowledge which would be “needed to compete.”
FedEx apprehension over Amazon’s taking their glory once again showed up in December 2018. Morgan Stanley analyst Ravi Shanker warned that the marketplace could sap revenue from the supplier, which currently handles up to 50% of Amazon’s package volumes.
Ravi claimed Amazon Air could present a 2% fall in revenue for FedEx, rising to 10% in 2025.
This comes as no surprise as Amazon have been heavily investing in their fulfilment network. In Q1 of 2019, Amazon announced to invest $800 million to launch one-day delivery offering for US customers. Now, Amazon sees next-day shipments to the majority (72%) of US shoppers.
One Response
Sometimes the only way is to walk away. Business often gets seduced by volume at the expense of profitability. The huge volume that someone like Amazon can offer is attractive, but if you end up losing on the deal then walk away.