Multinational companies always compete with one another, for supremacy. A prominent example of this is the ongoing feud between FedEx and Amazon. Both companies are competing with each other lately. Now FedEx has decided to end its contract with Amazon.
CNBC states that FedEx has decided not to renew its shipping contract with Amazon. This contract doesn’t involve ground deliveries; it only involves air transportation. UPS handles Amazon’s two-day contract. On the other hand, FedEx handles other logistical stuff.
This decision of the company not to renew its contract with Amazon is a clear sign of the rising competition between the US most dominant e-commerce company and the largest shipping industry. You can say that FedEx has played an important role in Amazon’s success. However, other companies, like the United States Postal Service and UPS have also played their part in Amazon’s success.
Everyone knows that Amazon wants to own everything in its chain, like warehouses which store products, ships, trucks, and planes. Amazon founder and CEO, Jeff Bezos, recently celebrated the inauguration of the Company’s $1.5 billion, 3 million-square-foot air hub, located close to the Kentucky international airport. Amazon has just introduced its new Hybrid Prime delivery drones. These drones will help the Company reach new heights. Amazon is hopeful that these drones will help the Company beat its competitors, like FedEx.
FedEx has recently given a public statement, which says, “We have pondered and decided not to renew our FedEx US domestic contract with Amazon. Now, we are looking towards a much broader e-commerce market. This decision doesn’t apply to any present contracts between FedEx and Amazon. All those contracts still hold.” It looks like FedEx will still provide shipping services to Amazon. However, we still don’t know about the exact dealings.
This decision looks quite bold. However, it isn’t that bold, considering that Amazon isn’t FedEx biggest partner. In fact, Amazon represented just 1.3 percent of FedEx revenue last year. The Company has recently stated that Amazon isn’t their biggest customer. Therefore, ending this relation won’t have a big impact on the Company.
In another statement, FedEx states, “There is an ever-increasing demand in the e-commerce industry. It can grow to 50 to 100 million packages a day in the States, by 2026. Our Company has built a constant reputation to serve thousands of customers in the e-commerce industry. We look forward to our role as a leader, in the commerce world.”
Like FedEx, this decision won’t also hurt Amazon. The reason is that Amazon has put in years to build its own delivery infrastructure, down to the small details. The Company owns many air hubs, delivery trucks, and freighter planes. Now, Amazon has introduced Flex delivery drivers, which will be employed in a similar method to Uber.
Amazon has released its own statement, in which they say, “We totally understand and respect FedEx decision to cut ties with us. We thank them greatly for their cooperation.”
However, Amazon might not be totally unfazed by this decision. The last ten-year statistics show that Amazon’s total infrastructure has increased from $1 billion to $34 billion. This is quite a major increase. Amazon also owns a huge infrastructure of shipping networks. The Company could reduce its budget a bit, and come up with faster delivery methods, like the Prime Now same-day delivery initiative.
FedEx looks quite uninterested in this contract and it doesn’t want to help Amazon gain an edge over others. However, it will still provide Amazon with some services. The Company is also looking to develop Amazon-alternative delivery programs. FedEx now offers its customers a FedEx Extra Hours offer. This allows late-night deliveries and delivers products as late as 2:00 a.m., in one or two days. This is somewhat similar to what Amazon Prime offers.
