FedEx pulls from US Amazon small package deliveries

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Citi Research analyst Christian Wetherbee believes it is a tactic to win more business.

This is an interesting move from FedEx and according to experts; it is a move that will allow the company to pick up more non-Amazon contracts.

The shipping company announced Wednesday that it would no longer make ground deliveries for Amazon once its contract expires at the end of this month.

"Furthermore, the decision reflects the reality that Amazon's economic reach has grown so great that the company has started to alienate not just rival retailers, but longtime business partners", write David Yaffe-Bellany and Michael Corkery for The New York Times.

Meanwhile, FedEx Ground is working to wring out more residential profit by shifting the delivery of almost 2 million SmartPost packages from U.S. Postal Service mail carriers to its own drivers.

FedEx has suggested Amazon might be a growing threat, stating in its 2018 annual report that if "current customers, such as, become competitors and bundle transportation with other services, it will reduce our revenue and could negatively impact our financial condition and results of operation". They noted that it took many years and billions of dollars for their companies to build extensive, worldwide networks of planes and delivery trucks. "For many reasons, we think it is doubtful that that will be the case". "They wouldn't carry competitor packages, like UPS, so why would they carry Amazon packages?" she said. However, what's true is that Amazon deliveries only accounted for about one percent of all revenue generated by FedEx. UPS reeled in some $71.861 billion in revenue for the financial reporting year ending December 31, 2018, its most recent annual revenue count as of the time of publication of this article.

After months of speculation, two of the biggest names in delivery will officially no longer be working together. The higher costs were related to reconfiguring its warehouses and moving products and goods to facilities that were closer to its customers.

"This will make it not worth mentioning", said Stifel analyst David Ross, in a note to clients.

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