Why FedEx Dumped Amazon

It’s no secret by now that Amazon and FedEx have parted ways–first by dropping Express shipments for Amazon, then as a partnered carrier for inbound FBA shipments, and finally end-customer deliveries). A lot of folks still seem to think this is entirely Amazon’s fault (it’s easy to blame the behemoth). In reality, FedEx should shoulder a lot of the blame in FedEx no longer being an option for customer deliveries, express deliveries, and (often cheaper) inbound-to-warehouse shipments for 3rd-party sellers.

The Wall Street Journal‘s podcast The Journal tries to tackle this touchy subject.

From the podcast, they describe how FedEx’s CEO and founder Fred Smith thought Amazon getting into the shipping business and being a competitor was “fantastical.” He didn’t believe Amazon would build out a network that would rival FedEx.

That’s not the kicker, though. FedEx wouldn’t really have had a problem with Amazon’s new logistics network that built out to a capacity in just a few years what took UPS and FedEx decades. The gut-punch was Amazon announcing last year that it would eventually branch into shipping outside customer packages as well, in addition to its own.

FedEx isn’t sad about breaking this relationship up, either. Amazon accounted for just $900M of FedEx business, or less than 1%, all with a host of risks and little upside. UPS’ Amazon revenue is closer to 10% of its total and has a lot more at stake. Staying in makes more sense.

Ultimately this comes down to two things. First: FedEx decided it didn’t need Amazon’s money if they’re going to become too much of a competitor. FedEx pulled the “you can’t fire me; I quit” card before Amazon could push them out through the natural course of events. Second, FedEx has a new opportunity to bolster its relationships with other retailers without having to deal with all the chaos and congestion that Prime Day and Amazon’s holiday events. They can bill their service as focusing on “everyone but Amazon” and that’s appealing to many retailers and other B2C shippers. “Your package will show up on time because, unlike our competitor, we don’t have the unpredictable burden Amazon has no remorse for creating.”

Last Updated: February, 7th, 2021 at 07:19 pm UTC
Johnathan Lyman

Johnathan Lyman



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