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FedEx has decided not to renew any of its shipping contracts with Amazon in a context of heightened competition between the two companies. according to CNBC. The contract in question is Amazon's FedEx Express contract, which, according to Amazon, is used for parcel air transport and not for last mile ground deliveries. As noted earlier, Amazon Prime's deliveries in two days are mostly done by UPS. According to Amazon, its contracts with FedEx to manage any other logistics, including the resolution of unresolved UPS issues, are still in effect.
Nevertheless, FedEx's decision not to renew its contract with Amazon is evidence of escalating tensions between the US shipping industry and the country's largest and most dominant e-commerce company. The success of Amazon is partly due to free shipping, a huge cost for transportation companies like FedEx, UPS and United States Postal Service.
It's no secret to anyone. Amazon wants to own every link in its supply chain, from warehouses where its products are stored, to planes, cargo ships and delivery trucks that transport its products around the world. Last month, Amazon CEO Jeff Bezos celebrated the $ 1.5 billion construction of the company's air center, which links to Cincinnati / Northern Kentucky International Airport. . Earlier this week, Amazon unveiled its all-new Prime Air hybrid delivery drone, a device that Amazon says will someday compete with FedEx and UPS delivery trucks.
"FedEx has made the strategic decision not to renew its US domestic contract with Amazon.com, Inc., because we want to serve the broader e-commerce market," reads FedEx statement on Twitter. by CNBC reporter Carl Quintanilla. . "This decision has no impact on existing contracts between Amazon.com and other FedEx business units, nor on international services." It therefore appears that Amazon will still use FedEx for shipments in certain circumstances, although we do not know how much of the commercial relationship of the two companies involved FedEx Express.
FedEx added that Amazon accounted for less than 1.3 percent of FedEx's total revenue last year. He also said that Amazon was not the biggest customer of the company. Therefore, the choice of not renewing its Express contract may not have a significant impact on FedEx. "There is significant demand and growth opportunities for e-commerce, which is expected to grow from 50 million to 100 million packets per day in the US by 2026," FedEx said. "FedEx has already developed its network and ability to serve thousands of retailers in the e-commerce space. We are excited about the future of e-commerce and our leadership role in this area. "
This decision should not come as a surprise to Amazon, which has spent years building its own delivery infrastructure to reduce logistics costs and better control how its products pass from manufacturers to Amazon warehouses and then to customers' homes. The company oversees a vast logistics network of warehouses, air platforms and cargo freighters, in addition to its growing network of Flex personal chauffeurs, which use a Uber-type contract model.
"We respect FedEx's decision and thank them for their role in serving Amazon's customers over the years," said a spokeswoman for Amazon. The edge.
However, a quick glance at the company's bottom line paints a bleak picture of Amazon's cost of growth. In the last 10 years, the company's logistics and shipping costs have skyrocketed from about $ 1 billion each to about $ 34 billion and $ 28 billion in 2018. By owning the infrastructure of its transportation network, Amazon could significantly reduce its costs while enabling it to offer ever faster means of product delivery, such as its same-day existing Prime Now delivery initiative and delivery programs. Grocery store and food.
FedEx, on the other hand, does not seem to want to help one of its major competitors gain a competitive advantage to make it go away. Although FedEx still provides some of its services to Amazon, the company is currently developing its own alternatives to Amazon-type distribution programs. FedEx now offers FedEx Extra Hours retailers an overnight delivery option with products ordered until 2 am the next day or in two days, such as Amazon Prime.
Update from June 7th at 3:03 pm ET: Statement added by Amazon.
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