The FedEx and Amazon breakup saga continues. As Amazon (NASDAQ:AMZN) continues to emerge as a robust delivery competitor, FedEx (NYSE:FDX) has now announced it will stop ground delivery for Amazon when their contract ends at the end of this month.
FedEx Ending Ground Delivery for Amazon Isn’t Necessarily Surprising
Just a couple of months ago, FedEx announced it will stop doing Express deliveries for Amazon. While the break up is big news in the shipping community, it won’t affect FedEx all that much. Amazon only accounted for 1.8% of FedEx’s revenue in 2018—not even reaching $1 billion.
Many believe that FedEx moving away from Amazon makes a lot of sense. From FedEx’s perspective, it doesn’t pencil out to keep maintain the Ground relationship with the eCommerce giant. Renewing the Ground contract would mean supporting a competitor that doesn’t make FedEx that much money in the first place. Instead, FedEx could focus on picking up more revenue-generating business from smaller shippers. In fact, that is now exactly what the carrier plans on doing.
“This change is consistent with our strategy to focus on the broader eCommerce market,” FedEx said in an official statement.
Note that FedEx will still maintain a contract with Amazon for international deliveries.
Which Carrier Will Turn Away from Amazon Next?
The FedEx and Amazon breakup begs the question of which carrier will be next to walk away. Amazon is now its own biggest shipper, which means that the other major carriers such as USPS and UPS (NYSE:UPS) will keep losing out on Amazon package volume over time.
Meanwhile, Amazon has been pulling a ton of package volume away from USPS since 2017—50%, to be exact. However, both entities will have to rely on each other quite a bit for the foreseeable future. Amazon needs USPS’ delivery network to complete last mile delivery, and USPS obviously benefits from the (still) huge amount of package volume that Amazon injects into their network.
eCommerce continues to enjoy explosive growth year over year, and Amazon is no doubt the biggest player in the game. As a result, most carriers and delivery companies wouldn’t dream of disrupting their relationships with Amazon. However, a major carrier such as FedEx officially severing ties has the whole shipping community wondering: who will be next?