FedEx won’t be renewing its ground delivery contract with Amazon when it expires at the end of the month, Bloomberg reported Wednesday. This news comes just two months after FedEx announced that its domestic Express service would no longer carry Amazon packages by plane.
“This change is consistent with our strategy to focus on the broader e-commerce market,” FedEx told Bloomberg, highlighting the fact that Amazon provided just 1.3 percent of FedEx’s income last year. (Vox has reached out to FedEx for comment.)
On the record, the two entities have never expressed anything but vague corporate friendliness towards each other. Amazon told Vox, “We are constantly innovating to improve the carrier experience and sometimes that means reevaluating our carrier relationships. FedEx has been a great partner over the years and we appreciate all their work delivering packages to our customers.” Still, the two companies have engaged in something of a shipping arms race for years.
In May, FedEx announced that it would start offering service seven days a week, starting next January (as did UPS). This was just a few months after announcing its Extra Hours service, which promised next-day local delivery or two-day shipping anywhere in the US for orders placed as late as 2 am the night before. In February, it started trials of an autonomous delivery robot named SameDay Bot.
Amazon, for its part, is growing into a logistics behemoth, with hundreds of fulfillment centers in the US and Europe, a leased fleet of 40 Boeing cargo planes, two regional air hubs, a new staff of thousands of full-time delivery drivers, and a growing freight shipping arm.
In October 2017 it launched Amazon Key, an option for customers to let couriers open their front doors using smart locks. Six months later, this expanded to delivering packages directly to the trunks of people’s cars. This April, the program expanded again to let Amazon delivery drivers directly into garages. The company is also still working on its Prime Air delivery drone; a new version will supposedly start making limited deliveries soon.
Amazon can fill gaps in its own system with UPS or the US Postal Service. FedEx will also still make international deliveries for Amazon.
Amazon does have its work cut out for it, having promised one-day shipping for more than 100 million Prime members earlier this year. (It’s reportedly spending $800 million to make this a reality.)
The one-day shipping announcement came on the heels of reports that Amazon was struggling just to meet consumer expectations for two-day shipping, often encouraging them to bundle small items together into less frequent shipments, choose one day each week to receive all of their Amazon packages, or have orders sent to centralized lockers rather than their homes. In July, workers at Amazon warehouses in Minnesota went on strike during the company’s annual Prime Day sale, protesting the move to one-day shipping, which they said would effectively double their already strenuous workload.
But Juozas Kaziukėnas, founder and CEO of the business intelligence firm Marketplace Pulse, told Vox, “To me, this whole thing is Amazon flexing their ability to do this. This renders Prime shipping much more valuable, because even if some orders are delayed, the perception of one-day shipping is very valuable, because no one else can do it. That’s what’s going to keep people subscribing to Prime.” He also called one-day shipping “borderline impossible” for “everyone else” for at least the next five years.
One-day shipping began earlier this summer for 10 million products on the Amazon website, but it remains to be seen if the company will pull it off in the long term.
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