World’s leading logistics platform FedEx is dropping a contract for air shipment of packages for Amazon within the United States, reducing its ties with the online retail giant that is already expanding its own delivery business.
FedEx said it will not renew the contract for domestic FedEx Express handling of Amazon shipments when the deal expires June 30.
It’s “a strategic decision” that will let FedEx focus on thousands of other retailers including Target, Walgreens and Walmart, company spokeswoman Katie Wassmer.
On FedEx decision, Amazon in its reply said, “We respected FedEx’s decision and thanked the delivery company for serving Amazon customers over the years.”
Amazon has been expanding its fleet of planes and is building package-sorting hubs at two airports. It’s also launching a program that lets contractors start businesses delivering packages in vans bearing the Amazon smile logo.
With a decades-long head start in delivering packages, FedEx has highly developed global networks. Amazon, however, is more than three times their size by revenue and was sitting on about USD 23.5 billion in cash at the end of March.
FedEx did not disclose details of the Amazon contract, but Wassmer said Amazon represented less than 1.3 percent of FedEx revenue last year. That would work out to about USD 907 million in revenue for the fiscal year that just ended May 31, according to Cowen Research analyst Helane Becker calculated.
The loss of the contract will be “minimal” to FedEx because it is a low-margin business, Becker wrote in a note to clients.
The company is also taking back nearly 2 million daily residential deliveries that it currently outsources to the post office.
FedEx shares rose USD 1.17, or 0.7 percent, to close at USD 158.02, while Amazon gained USD 49.67, or 2.8 percent, to USD 1,804.03.