Just two months ago, FedEx ended its contract for air delivery with Amazon. The company made an announcement on Wednesday stating that it may end ground deliveries for Amazon.
According to FedEx, the move to end business with Amazon creates an opportunity for the company to venture into other eCommerce markets with Target and Walmart being top of the list. The company can do this now that more retailers are willing to venture into the online business; hence, they won’t suffer huge losses from the move.
A statement by Cowen analyst Helen Becker indicated that FedEx wouldn’t lose much from ending its contract with Amazon. She said that the company’s profits with Amazon are in the single-digit range; hence, the move allows FedEx to get into more profitable ventures with other retailers.
However, this move could be seen as a way for FedEx to protect itself, seeing as Amazon is growing its air and ground transportation fleet. This means that soon enough, the company may become less reliant on the likes of FedEx and UPS.
A warning submitted to the US government by FedEx stated that Amazon getting into the business would reduce prices and become a threat to the company’s revenue. Amazon is already hiring jets, and has recently introduced a program where contractors can use their vans with the company’s logo to do deliveries to clients.
FedEx CEO Fred Smith had stated in December that the company doesn’t view Amazon as a competitor. However, a regulatory filing made in February by Amazon said that it’s in competition with companies such as FedEx; hence, its decision to drop them as clients makes sense.