FedEx to end air shipping contract with Amazon

Mae Love
June 10, 2019

The Amazon contract expires at the end of this month and doesn't cover worldwide services or domestic operations at other units, such as FedEx's ground deliveries. FedEx said Amazon was responsible for less than 1.3 percent of its 2018 revenue, which clocked in at $65.5 billion.

It's "a strategic decision" that will let FedEx focus on thousands of other retailers including Target, Walgreens and Walmart, company spokeswoman Katie Wassmer.

FedEx forecast that the market would double to 100 million packages per day in the United States by 2026. "We are excited about the future of e-commerce and our role as a leader in it".

"We respect FedEx's decision and thank them for their role serving Amazon customers over the years", the Seattle-based retailer said in a statement.

"This is just a fact of Amazon using less of FedEx over the previous year or so given that they're building out their own air fleet, combined with the fact their volume probably didn't warrant the kind of discounts they were getting", Klaskow said.

FedEx chairman Fred Smith has often downplayed the threat of shipping competition from Amazon, citing the small percentage of its overall business plus the difficulty of creating a massive logistics and delivery network. The contract with Amazon expires on June 30 and only impacts air services.

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The shipping company said Friday that it is ending its domestic air shipping contract with Amazon. "Obviously, that doesn't always translate into a new deal".

FedEx's surprise move signals that the No. 2 USA courier will bank on smaller e-commerce customers that lack Amazon's bargaining power for big-volume discounts. In its place, FedEx will focus on other e-commerce companies.

Deliveries made via FedEx's Express service typically arrive overnight or in two to three days. "There is a piece of the supply chain that will be hard for Amazon to serve without them".

Inc.is emerging as a potentially formidable challenger to FedEx Corp. and United Parcel Service Inc.

Amazon did not immediately respond to Business Insider's request for comment.

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