Date: 7th August 2019
FedEx said in a statement on Wednesday that it would cancel the ground-delivery contract with online retailer Amazon Inc. This comes as the e-commerce giant works towards developing its own delivery network.
The US package delivery company had decided to do away with another contract with Amazon two months ago. FedEx did not renew the contract for the delivery of Amazon products express service which is plane-based.
The delivery company said that the decision to not renew the contracts is in accordance with the strategy of the company. It is driven to work with more firms in the e-commerce market, particularly those that are rivals of Amazon.
The online retailer has been focusing on the development of its own delivery network using planes, vans and trucks. This move is likely to challenge delivery companies like United Parcel Service and FedEx – the companies Amazon used for the delivery of its goods earlier.
Analysts claim that Amazon was better off by using United Parcel Service for its deliveries via planes. Therefore, it was not sensible to keep its contract with FedEx regardless of the statements put up by FedEx.
As of last year, FedEx earned only 1.3 percent of its revenue by offering its service to Amazon. On the other hand, United Parcel Service earned a larger percentage of its revenue from the online retailer. Moreover, analysts said that it is expected to earn more after the recent move by FedEx.
FedEx acknowledged the trade tensions between the United States and China and said that it would affect its performance in the coming year, considering the additional burden due to cancelling its contract with Amazon. The delivery company covers the US and Canada with its ground delivery services.
No comments have been received from Amazon regarding the matter.