FedEx said it is ending a ground shipping deal with Amazon, the shipping giant’s latest move to distance itself from its logistics rival.
The contract is set to expire at the end of the month, and FedEx has elected not to renew the deal, the company said. Two months ago, FedEx Express, the company’s fleet of delivery planes, said it would no longer fly Amazon packages in the U.S.
“This change is consistent with our strategy to focus on the broader e-commerce market, which the recent announcements related to our FedEx Ground network have us positioned extraordinarily well to do,” the company said in a statement.
Amazon issued the following statement on the deal: “We are constantly innovating to improve the carrier experience and sometimes that means reevaluating our carrier relationships. FedEx has been a great partner over the years and we appreciate all their work delivering packages to our customers.”
FedEx’s retreat from Amazon could put some pressure on the tech giant at a time when it is relying on third-party partners to help expand delivery operations. Amazon is in the midst of speeding up its core delivery option from a two-day turnaround to a one-day offering. Amazon spent $800 million on the shift in the last quarter, and the move is proving to be more expensive than the company expected.
Rumors have persisted that Amazon will someday cut out its third-party delivery partners like FedEx, as well as UPS and USPS, to focus on its own shipping operations. However, the move to one-day shipping means it is going to need those carriers more than ever, executives have said. And now the company has one less partner.
“We’re going to be using all of the available levers that we have right now,” Amazon CFO Brian Olsavsky said on a call with investors earlier this year.
Amazon posted $8.1 billion in shipping costs in the second quarter, a year-over-year spike of 36 percent.
Amazon was responsible for approximately 1.3 percent of FedEx sales in 2018, according to Bloomberg.
Earlier this year, FedEx extended delivery services to seven days a week, a move meant to capture a bigger chunk of e-commerce shipments. Previously, FedEx only went to seven-day operations during the holiday season.