- FedEx will not renew its U.S. Express domestic contract with Amazon, the third-party logistics (3PL) said in a statement Friday. It will focus instead on "serving the broader e-commerce market." The contract with Amazon expires on June 30 and only impacts air services.
- FedEx pointed to "significant demand and opportunity for growth in e-commerce" and emphasized that less than 1.3% of FedEx's total revenue comes from Amazon.
- The severing of ties does not affect existing contracts or Amazon shipments through other FedEx business units, such as FedEx Ground, last-mile deliveries or international shipments.
The surprise move by FedEx Friday afternoon marks a shift in tone from just months ago when FedEx CEO Fred Smith described Amazon as a "good customer." The 3PL has continuously defended itself against analyst warnings of Amazon Air as a threat to established businesses like UPS and FedEx.
By breaking ties with Amazon for air shipments, FedEx seems to convey a lack of interest in delivering packages for a company building out its own air network. FedEx declined to comment beyond its statement.
Earlier this year, an SEC filing revealed Amazon Air might take a 40% stake in Atlas Air Worldwide Holdings and ATSG. The e-tailer has also expanded its cargo hubs and aircraft fleets.
"We respect FedEx's decision and thank them for their role serving Amazon customers over the years," a spokesperson for Amazon told sister publication Supply Chain Dive in an email.
Even as Amazon continues to build its logistics and freight network, the company continues to rely on established logistics providers such as UPS, FedEx and the U.S. Postal Service, to deliver the large volumes of parcels coming from its marketplace. Amazon will still be able to use services such as FedEx Ground to deliver parcels.
"FedEx will achieve higher margins and better returns on its investments in its Express network by re-deploying capacity to customers other than Amazon," Jonathan Root, Moody's senior vice president and lead FedEx analyst, said in comments emailed to Retail Dive. "We believe Amazon, representing less than 1.3% of FedEx's nearly $70 billion of consolidated annual revenue, is one of FedEx' least profitable customers on a margin basis and that the decision implies that Amazon would not agree to financial terms that would meet FedEx' needs."
Amazon did not say how the severing of ties with FedEx Express might impact its ability to successfully roll out one-day shipping.
Matt Leonard contributed to this report.