FedEx will not renew its shipping contract with one of the world's largest online retailers and instead focus on its own shipping network. In its place, FedEx will focus on other e-commerce companies.
The FedEx service cited the "significant demand and opportunity" in e-commerce as its reason for ending the contract, saying online delivery is expected to grow from 50 million to 100 million parcels every day in the U.S. by 2026. "You could see the Express business eventually fading out and FedEx made the decision to go ahead and exit that side of the business with Amazon". On Friday, the company said that Amazon accounts for less than 1.3 percent of its total revenue.
"We respect FedEx's decision and thank them for their role serving Amazon customers over the years", the Seattle-based retailer said in a statement.
Among many other moves, Amazon last month broke ground on the northern Kentucky air hub - in a photo op that featured CEO Jeff Bezos driving a payloader - and is creating an army of delivery contractors through leasing 20,000 Mercedes Benz vans.
FedEx is reportedly making two significant changes to its Express U.S. ground delivery service.
In recent years, Amazon has steadily expanded its fleet of delivery aircraft, which Air Transport Services Group Inc and Atlas Air Worldwide Holdings have operated.
FedEx will not renew its Express domestic contract with Amazon, the 3PL said in a statement Friday.More news: Where's the plant-based beef? Grocers uncertain about Beyond Meat placement
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Amazon's emergence as a logistics giant has posed a costly challenge to FedEx and United Parcel Service Inc.by stepping up pressure for faster deliveries.
"This is just a fact of Amazon using less of FedEx over the past year or so given that they're building out their own air fleet, combined with the fact their volume probably didn't warrant the kind of discounts they were getting", Klaskow said.
In a move not entirely expected but hardly surprising, FedEx Corp.
Last year, Amazon spent $27 billion on shipping.
"They're sending a clear message to other competitors of Amazon, 'We want your business, and we're freeing up capacity to handle it, ' " Jindel said.
FedEx shares rose $1.17, or 0.7 per cent, to close at $158.02, while Amazon gained $49.67, or 2.8 per cent, to $1,804.03.