FedEx terminates its ground delivery contract with Amazon

FedEx on Wednesday announced that it is terminating its ground delivery contract with Amazon as the E-commerce giant concentrates on developing its own ground and air delivery network and poses more competition.

The move comes almost 2 months after the US courier delivery services company said that it was ending its air-based express delivery services contract with Amazon.

This move is parallel with the company’s strategy to concentrate on the broader E-commerce market, said FedEx via a statement as the delivery company looks at expanding as well as serving firms, which would include Amazon rivals.

On the other hand, Amazon said via a statement that it’s innovating constantly to enhance the overall carrier experience, which sometimes implies evaluating its carrier relationships.

In the past couple of months, Amazon has been focusing on growing its delivery system of vans, trucks, and planes and is being considered as possible competition to FedEx as well as United Parcel Service (UPS), the two companies which have counted Amazon as their customer since a long span of time.

According to analysts, the famous E-commerce retailer has garnered a much better tariff with UPS with regards to delivering packages on planes, so it doesn’t make a lot of sense for Amazon to collaborate with FedEx any more.

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Amazon made up below 1.3% of FedEx’s total revenue previous year. UPS, which relatively gains a bigger revenue share from Amazon, is expected to earn huge benefits from the higher volumes after this new move, say the analysts.

FedEx previously had warned in the month of June that the ongoing trade dispute between US-China and it cutting ties with Amazon may affect its 2020 fiscal performance.

In the meanwhile, FedEx Ground currently is working towards earning more of residential revenue by switching over around 2mn SmartPost package deliveries to its own drivers from US Postal Service mail carriers. This move should lessen costs by boosting the no. of packages delivered at each stop.