International shipping giant FedEx (FDX) announced this week that it has cut ties with Amazon (AMZN). The shipping company, which previously handled a small portion of Amazon’s ground deliveries in the United States, said that it wants to “focus on the broader e-commerce market” moving forward. In the future, FedEx plans to offer its services to companies like Walmart and Target as Amazon gears up to broaden its delivery services.
Drama in the Shipping Industry
The fight for the fastest shipping is currently the next frontier in the e-commerce industry. Retail giants like Walmart and Amazon have been fighting back and forth to nab the majority of the e-commerce market by essentially one-upping one another on incentives for consumers to shop with them. Walmart, which only broke into the e-commerce market in recent years, began offering free single day shipping on many of its online orders. Amazon, which became famous for its free, unlimited two-day shipping with an Amazon Prime membership, finally saw a real threat.
In response to Walmart’s shipping policy with all online orders over $35, Amazon promised to make single-day shipping a reality for most of its customers as soon as possible. Amazon’s “no minimum” on free, fast shipping makes it desirable in the eyes of the consumer, but the business model is challenging for companies that don’t have the infrastructure to do it as well. Thus, Walmart remains the only real threat to Amazon’s competitive service, but even with faster shipping it still only offers a limited supply of goods, where Amazon’s catalog is virtually infinite.
FedEx’s decision to part ways with Amazon has been a long time coming. The company revealed that its partnership with Amazon only made up about 1.3% of its 2018 revenue. Now, in 2019, FedEx has been slowly cutting ties. The company ended its air cargo contract with Amazon earlier this summer saying, “E-commerce is much bigger than any one company.” The statement alludes to FedEx’s plans to cut ties with the e-commerce giant completely and focus on smaller businesses. Amazon, on the other hand, plans to expand its single-day shipping in the United States using its own shipping infrastructure.
The Future of Shipping
It wasn’t long ago that the ease of access to e-commerce goods was only a dream of the future. Today, it’s a reality, and companies are working to make even faster shipping a reality with the development of things like shipping robots and delivery drones. FedEx announced that it’s secured partnerships with retailers like Walmart and Walgreens to deliver a more extensive single-day shipping. It will also work with Target to use the company’s brick and mortar storefront’s as localized shipping hubs. The end to FedEx’s contract with Amazon is unlikely to impact many deliveries, if at all.