Amazon’s unending, seemingly inevitable growth can be both a threat and an opportunity for its supply chain partners. For FedEx, the threat appears to have grown larger than the opportunity, prompting the logistics and delivery service to make moves distancing itself from the retail giant.
In particular, FedEx has refused to renew a contract that obligated it to devote part of its operational capacity to ensuring express delivery of Amazon packages. The contract was a small but meaningful element of FedEx’s overall strategy; Amazon accounted for approximately 1.3 percent of FedEx’s revenue, and the express delivery service was simply a percentage of that total.
Instead, increasing levels of FedEx’s business come from Walmart, Amazon’s chief rival. The relationship between Walmart and FedEx also appears to be expanding to include various elements. That is, the retailer is shipping far more products using FedEx’s standard and express services, reflecting its ambition to ensure both same and next-day delivery capacities to appeal to customers. Furthermore, Walmart has agreed to install about 500 FedEx counters in stores throughout the country.
But FedEx also is clear that it does not to intend to limit itself to any one retailer. The company has issued predictions that by 2026, U.S. consumers will be receiving 100 million packages per day. With this strategic belief that ecommerce and delivery demands are only going to keep growing, it actively plans to try to be the logistics provider for a vast range of retail partners. Noting its existing network capabilities, FedEx promises to serve the thousands of ecommerce retailers that need to get their product to customers too.
Perhaps the final nail in the coffin for the contract though were the moves by Amazon that put it in direct competition with its partner. As we have discussed previously in these abstracts, Amazon has vastly expanded its own delivery capabilities, adding airplane and truck fleets to its inventory and hiring millions of flex-time workers to put packages on doorsteps. These resources mimic the key advantages that FedEx has built up over time. In a sense then, the contract meant that FedEx was in the untenable position of “competing with Amazon for Amazon’s own business.”

Discussion Questions:

1. Why has FedEx ended its express shipping service through Amazon?

Source: Michael Corkery, The New York Times, June 7, 2019