Earlier last year, Amazon started pulling back from FedEx shipping, and moving shipping on its own through USPS and UPS. Now, it’s starting to bring its FedEx Ground contracts back, which is an interesting move for the industry giant.
Why would Amazon make such a surprising reversal? Wasn’t this part of Amazon’s long-term growth strategy? Let’s take a closer look at the facts.
Amazon and FedEx “Ban” Removed
FedEx lost Amazon’s contracts after Amazon determined that FedEx wasn’t able to move products with the consistency and quality that it needed. This corresponded with Amazon starting to move products in its own last-mile services, which further corresponded with a proliferation of Amazon fulfillment centers across the world, especially throughout North America.
Just following Christmas, Amazon removed its FedEx ban, citing evidence that the shipper had become more consistent and reliable. Third-party sellers are now able to choose FedEx as an option.
The Consequences of Amazon Shipments
Amazon is only a single customer of FedEx, and FedEx has been quick to state that Amazon doesn’t comprise a large volume of its transactions. Despite this, FedEx saw a rise in its stock price once the lift on the FedEx ban had been announced. This is likely both due to the fact that Amazon is a major player in the eCommerce market, and that it’s a positive sign for FedEx’s services overall.
Amazon shipping has been changing the world. A great deal of packages shipped via USPS and UPS are from Amazon. Amazon has negotiated deals with many carriers, and is now shipping through a number of last mile carriers. It has also aggressively increased its coverage for one day and even same day shipping. For Amazon, shipping is a critical part of its business.
Amazon Continues to Expand Its Delivery Service
Amazon is still expanding its own personal courier service, and Amazon trucks are seen with increasing frequency on the road. These Amazon trucks are driven by contractors who are hired to take packages from distribution areas directly to customers. Amazon’s delivery service has somewhat reduced its reliance on services such as UPS, USPS, and FedEx. But it’s just a last mile service: Amazon still needs major carriers to bring its products to and from most shipping centers.
Like many other areas of Amazon, its delivery service has come under fire due to the grueling requirements that it puts on its employees. And since these employees are contractors, the company has limited control over them. Customers complain of drivers, for instance, running over their dogs. On the driver’s side, drivers often feel unsafe, as they don’t feel they are delivering packages on personal property in any sort of “official” capacity, such as the US mail.
This is the type of “industry disruption” that could eventually have consequences — or could not have any consequences at all — depending on how quickly Amazon is able to adapt to the market and how quickly the market is able to adapt to it.
The Consequences of the FedEx Ban
Amazon’s FedEx ban means little for its own delivery service. It’s only lifting the ban for third-party sellers. But it’s still a good sentiment for FedEx, as it does show an increased level of faith in the service from the eCommerce giant. Its stock price does reflect this change in pricing.
FedEx is potentially poised to make a comeback depending on how well it continues to perform in the coming year. With a number of other options available, and companies such as Amazon starting their own delivery services, shipping companies are being disrupted. Walmart, Target, and other big box stores now offer person-to-person delivery, which does cut down on the amount of shipping done.
In a new world, many people may be picking up items at Amazon Lockers or Walmart Lockers, or engaging in shipping directly from distribution centers that are delivered and staffed by their own workers. Companies such as FedEx and UPS may need to adjust to this new world, and improve upon their logistics and shipping services to the point where they are once again critical to not only the average business but also consumer purchasing.
