For many years, Amazon has dominated the online market scene. It is done so by finding ways to stay had of the competition. Convenience is key here is Amazon can send anything to your home within a day or two. Need to buy a new bed? Comes with free shipping and it will get there, delivered by someone else, in a few days. What company can beat that?
As important as Amazon is, they rely on a network of various delivery companies to get their shipments out into their customer within the promised time. Over the last year or so, Amazon has been making changes to the way they deliver goods. They’ve actually been building up their own delivery fleet of Amazon trucks.
This undoubtedly save them a lot of money, because contracting out those deliveries to UPS and FedEx is costly. One company that’s getting fed up with Amazon is FedEx. Now that Amazon is building up its own fleet of trucks and planes, as well as adapting new technologies like drones to deliver packages, Amazon looks more and more like a competitor to FedEx rather than a team player.
Two months ago, FedEx announced that it would terminate their air delivery contract with the mega online retail store. Today was just announced that they would sever all ties with the company. This is a natural move for FedEx as Amazon continues to find alternative ways to deliver packages.
Amazon Was Hurting FedEx Business
As you can imagine, there’s a major infrastructure put in place so that companies like Amazon can keep their promises. It takes a lot of engineering and manpower to get to products from the opposite sides of the country to your home at the same time and within a 1 to 2-day window. That means companies like FedEx had to put more trucks and hire more workers, especially during the busy holiday season, to take care of increased demand.
It was just last month when FedEx said that because Amazon is using them less and less, it’s “negatively impacting our financial condition and results of operations.” Perhaps FedEx feels it can sever ties with Amazon as other companies like Target and Walmart are dramatically stepping up their e-commerce business in order to compete with Amazon.
The problem with that is, Walmart and target have their own fleet of trucks as well. They will undoubtedly use their own fleets more often to save money without having to contract out FedEx. But for right now, the move fits with FedEx wants to do. They claim that Amazon only made up about 1.3% of the 850 million they made last year.
Hopefully the severing of this relationship doesn’t impact the holiday season this year. It does mean UPS and other delivery companies, like the USPS, will have to ramp up their operations to fill the void.
