FedEx ends its partnership with Amazon, logistics company shares fall
FedEx shares fell 3% on Wednesday after the company announced it was ending its partnership with Amazon. At the end of August, the contract for ground transportation between the two companies ends, which FedEx decided not to renew..
FedEx notes that Amazon accounted for less than 1.3% of total revenue in 2018. At the same time, the company said it will continue to serve online shoppers through partnerships with other companies..
«This change is in line with our strategy to expand the e-commerce market», – said in a statement by FedEx.
For years, Amazon has used FedEx ground delivery service to deliver online orders to consumers. But Amazon is rapidly strengthening its own delivery network, boosting its established logistics business..
«We are constantly innovating to improve the carrier experience, and sometimes that means re-evaluating our relationship with carriers, ”said an Amazon spokesman. FedEx has been a great partner over the years and we appreciate all of their work in delivering packages to our customers.».
Open rivalry between companies lasts only a few months. FedEx CEO and Founder Fred Smith said back in December that the idea of a business threat from Amazon looks like «fantastic». But Amazon since 2015 is rapidly expanding its delivery business. The e-commerce giant is building its own delivery network, including the leasing of cargo planes and the purchase of trucks. In November, the company began hiring thousands of full-time drivers to deliver parcels from Amazon warehouses across the US, competing directly with the largest logistics companies FedEx and UPS..
FedEx terminated its air travel contract with Amazon in June. Meanwhile, UPS is investing heavily in expanding its capacity to handle more packages for Amazon and other shippers. UPS reported an increase in the volume of packets passing through its air network in June.
Despite Amazon’s investment in a new transportation network, Goldman Sachs analysts believe it could cost the company an additional $ 122 billion to catch up with industry leaders FedEx and UPS.
FedEx does not believe that parting with Amazon will do significant damage to its business.
«E-commerce itself is much larger than any single company, a spokesman for the logistics giant said in June. – The average daily small parcel volume in the United States is expected to double – from 50 million to 100 million – by 2026».
A FedEx spokesperson said the company has partnered with Walmart and Walgreens to provide next day delivery and has an agreement with Target to use stores as local hubs..
In recent years, consumers have been buying everything from toilet paper to trampolines on the internet, resulting in a dramatic increase in e-commerce shipments. FedEx and UPS have invested billions of dollars to cope with the increased volumes. FedEx Cuts Its Recent Fiscal Year Profit Expectation Twice Amid Falling Express Revenue and Rising Ground Business Spending.