With Amazon Prime Day just a couple of weeks away, FedEx revealed it will not renew a contract with Amazon to provide express delivery for the e-commerce giant’s bundles in the United States, amid increased competition between the two companies, according to CNBC.
FedEx, which made the statement Friday, said in a statement the change would not affect other existing contracts with Amazon or international services. FedEx Express only affects functions. FedEx will still serve as a carrier for Amazon to get last-mile deliveries.
However, FedEx’s decision to not renew its contract with Amazon is evidence of escalating tensions between the U.S. domestic shipping business and the country’s most prominent and most dominant e-commerce company. Amazon’s success is due in part to supplying free delivery, an enormous cost it has mostly paid out to shipping companies such as FedEx, UPS, and the United States Postal Service.
FedEx goes on to say that Amazon represented less than 1.3 percent of total FedEx revenue last year. Additionally, it revealed that Amazon isn’t the organization’s biggest client, therefore choosing not to revive its Express contract may not have a significant impact on FedEx, either. “FedEx has already built out the network and capacity to serve thousands of retailers in the e-commerce space. We are excited about the future of e-commerce and our role as a leader in it.”
Within the last ten decades, Amazon’s logistics and transport costs have ballooned from roughly $1 billion each to approximately $34 billion and $28 billion, respectively, in 2018. By owning the infrastructure of its shipping network, Amazon could drastically cut costs while also allowing it to come up with ever-faster methods of delivering products, such as its current Prime Now same-day delivery initiative and its grocery and food delivery programs.
FedEx estimates that e-commerce is anticipated to grow from 50 million to 100 million packages every day in the U.S. from 2026. That expansion has directed FedEx and Amazon and others to look for efficiencies in their own companies as well as develop and deploy new technology.