FedEx decided it won't renew its FedEx Express US domestic contract with Internet retailer Amazon, the company revealed on Friday. The contract impacts shipping via FedEx air services, meaning that FedEx will still deliver Amazon packages as a last-mile delivery partner.
Amazon accounted for less than 1.3% of FedEx's revenue a year ago, the company said in its statement.
However, the decision did not really come as a surprise to Amazon, the report said.
According to Reuters, FedEx plans to hire 700 part-time Express drivers in 160 rural and residential markets.
While noting that Amazon relies more heavily on UPS and USPS than on FedEx, the Post said, the lack of an air contract with FedEx could hurt Amazon during the holidays "if it sees a flood in last-minute orders and needs extra capacity".
In a statement, FedEx said it made the move to focus on broader e-commerce growth.
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It's "a strategic decision" that will let FedEx focus on thousands of other retailers including Target, Walgreens and Walmart, company spokeswoman Katie Wassmer.
"We respect FedEx's decision and thank them for their role serving Amazon customers over the years", a spokesperson for Amazon told Supply Chain Dive in an email.
Amazon had already been reducing its business with FedEx Express over the past 14 months, said Lee Klaskow, an analyst at Bloomberg Intelligence. "We are excited about the future of e-commerce and our role as a leader in it", it said.
Amazon has been testing a new online service that matches truck drivers with shippers since past year.
Satish Jindel, president of shipping data firm ShipMatrix, said this moves signals FedEx more aggressively going after B2C ecommerce, which represents about 25% of its volume compared to 47% for UPS.
But those kinds of seasonal spikes can put stresses on shipping carriers' operations - and committing to meet Amazon's holiday expectations can prove costly. It's also launching a program that lets contractors start businesses delivering packages in vans bearing the Amazon smile logo. Amazon, however, is more than three times their size by revenue and was sitting on about $23.5 billion in cash at the end of March.