Why is Amazon banning FedEx ground delivery?
Starting Dec. 18, Amazon will begin temporarily restricting marketplace sellers from using FedEx’s ground services for Prime orders. Follow-up reports speculated whether the ban was due to FedEx’s under-performance as Amazon attests, a continuing delivery turf war or Amazon’s ambitions.
In an email sent to third-party sellers Sunday attained by the Wall Street Journal, Amazon said the ban will last “until the delivery performance of these ship methods improves.” Amazon declined further comment.
Some third-party sellers complained of the last-minute change just before the peak of holiday selling and the likely higher rates UPS would demand.
FedEx said in a statement, “While this decision affects a very small number of shippers, it limits the options for those small businesses on some of the highest demand shipping days in history, and may compromise their ability to meet customer demands and manage their businesses.”
Yet two sources told American Shipper that FedEx Ground and its FedEx Home Delivery sub-unit have faced challenges meeting Amazon’s on-time targets. John Haber, a supply chain consultant at Spend Management Experts, told Bloomberg that FedEx has struggled meeting seasonal demand.
The ban follows FedEx’s announcement in August that it was ending its ground delivery contract with Amazon after terminating its express U.S. shipping contract with Amazon in June. In a statement at the time, FedEx said the change “is consistent with our strategy to focus on the broader e-commerce market” and followed the expansion of ground delivery to seven days a week. Some saw FedEx increasingly uncomfortable partnering with a growing logistics competitor and wanting to position itself as the go-to courier for non-Amazon retailers.
Contradicting some reports, however, a source close to FedEx told American Shipper Amazon ended the ground delivery portion due to spotty delivery performance.
Amazon is building out its own shipping and logistics network that now delivers about half of its shipments, according to estimates from Morgan Stanley and Rakuten. Third-party retailers, accounting for 58 percent of Amazon’s retail activity in 2018, pay Amazon commissions on each sale. Many also pay Amazon for warehousing and delivery, also offered by FedEx.
- Amazon Blocks Sellers From Using FedEx Ground for Prime Shipments – Wall Street Journal
- Amazon blocks sellers from using FedEx ground-delivery shipping – CNBC
- Amazon sellers can’t use FedEx Ground for Prime shipments – CNN
- Amazon Cuts Off FedEx Ground for Prime Holiday Shipments – Bloomberg
- Amazon halting FedEx Ground deliveries by Seller Fulfilled Prime customers – American Shipper
DISCUSSION QUESTIONS: What do you believe is the reason behind the restriction Amazon temporarily imposed on marketplace sellers from using FedEx’s ground delivery services for Prime? Do you see either Amazon, FedEx, third-party sellers or consumers being hurt or helped by the ban?