FedEx Express has cut ties with Amazon for U.S. domestic deliveries, the company announced Friday.
FedEx said the decision comes “as we focus on serving the broader e-commerce market.”
“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,” the company said in a statement. “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.”
FedEx revenue attributable to Amazon was less than 1.3% in 2018, the company said.
The decision does not affect other contracts between FedEx and Amazon, it said.
Analyst: FedEx ‘ripping the Band-Aid off’
“They’re ripping the Band-Aid off,” Kevin Sterling, an analyst at investment bank Seaport Global, said of FedEx.
Sterling said it’s “smart for FedEx to get out in front of this” and not attempt to grow its business with Amazon of late, as the e-commerce giant appears to have larger ambitions.
The move was easy to see coming, Sterling said, as Amazon builds up its own fleet to deliver items in its network. Over time, FedEx Ground and FedEx Freight could move away from business with Amazon, he added.
FedEx executives have repeatedly downplayed Amazon as a threat to its business, pointing out that rival UPS does much more business with the e-commerce giant.
“Is this a case of Amazon flexing its muscles and FedEx willing to walk away versus cave in?” asked Cathy Roberson, founder of Logistics Trends & Insights on Twitter.
ShipMatrix founder Satish Jindel said that Amazon’s volume with FedEx Express may have been declining over the past seven months, so a contract with similar rates as before may not have been in the cards. FedEx’s strong relationship with Walmart, a fierce Amazon competitor, may also have played into the decision, he said.
Jindel estimates the total contract value between Amazon and FedEx to be about $840 million, with FedEx Express making up $150 million to $200 million of that value.
Amazon did not immediately respond to a request for comment Friday.
Follow Max Garland on Twitter at @MaxGarlandTypes.