In a surprise move, FedEx issued a statement June 7, 2019, that it won’t be renewing its domestic Express contract with Amazon.com. But with Amazon.com revenue representing only 1.3% of total FedEx revenue for the 12-month period ended December 31, 2018 and Amazon expanding its own cargo hubs and aircraft fleets (as well as potentially taking a 40% stake in Atlas Air Worldwide Holdings and ATSG), FedEx is focusing on “serving the broader e-commerce market.”
The contract with Amazon was expiring June 30, 2019, and didn’t affect ground delivery services. Amazon will continue to use UPS, FedEx Ground and the U.S. Postal Service to deliver parcels.
The FedEx decision doesn’t impact any existing contracts between Amazon.com and other FedEx business units or those relating to international services.
FedEx’s statement said, “There is significant demand and opportunity for growth in e-commerce which is expected to grow from 50 million to 100 million packages a day in the U.S. by 2026. 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.”
The move makes sense for both companies as Amazon becomes a direct competitor to FedEx and with Amazon getting better rates from UPS according to Dean Maciuba, director of consulting services at Logistics Trends and Insights.